Trend-following indicators - Page 204

# Thread: Trend-following indicators

1. ## Trend-following indicators

Trend-following indicators, or trending indicators help trader to analyse main tendency in the market and direction of the trend either rising or falling. Market exists in 3 basic conditions: bullish trend, bearish trend and flat.

Bullish trend is indicated when price moves from lower left corner to upper right.

Bearish trend occurs when price moves from upper left corner to lower right.

Those terms are derivatives of «bulls » and «bears» - buyers and sellers in trading slang.

Flat occurs when price goes sideways in horizontal channel.

Let’s describe Moving Average (MA)

Most traders think that MA is «lagging indicator». It’s not absolutely true because this indicator filters data for a given period (you can set it in parameters of indicator). For example, if parameter of MA is 2 and it’s calculated using «close» price, it means that it will take into consideration 2 last candles’ closing prices.

Example is on the Picture № 1:

We see from this chart that this indicator follows average closing price of 2 periods.

Of course, such information is not very useful.

Indicator with very small parameter will often change its direction that will confuse trader in his analysis. Its recommended to set more solid parameter, in this case information will be more reliable. But the bigger parameter we set, the more «lagging» indicator we get.
On the next chart (Picture № 2) you see MA with parameter 14, using closing prices for calculation.

Charts above show indicators with calculation method called «simple». You can see how to set it up on picture № 3.

Calculation formula for Simlple moving average:

Simple = SUM (CLOSE (i), N) / N
• where SUM — sum of parameters;
• CLOSE (i) — closing price;
• N — number of candles calculated.

Therefore, calculation of indicator from Picture № 3 is made this way:

Simple = SUM (CLOSE (i), 14) / 14

2. Originally Posted by sniper007
They are following the market movement and then it is that of the trader to make good use of the market movement and make analysis. I make use of bollinger band and I don't wait for the bollinger band to give me a good perfect trading signals, but what I do is that I analyse the opportunity it has given to me and then take only the best one which seems to be profitable.
many of traders believe on something that still working for them. soon after they find out that their usual setups not working, traders will start finding some solution which one of them is to change the way they think about market and how to analyze it with different methods. this what i've done with my trading from when i used to trade with indicators until now i starting to trade with news. somehow it's good to stick to something you understand, for now.

3. Moving average has been find so effective in determining the market trend and there are so many different ways by which it can be used . Some traders use 50EMA on daily time frame to decide the trend , if the price is above it , they consider the market bullish and if price is below it they consider the market bearish . That may not work perfectly all the times but at least it can give a trader fair ideas of where the market may be heading to . If you have a naked chart on higher time frames , you can even determine the prevailing market trend without using any technical indicators

4. layigold, this is wrong to use 50EMA on daily time frame, from my experience this is good for 1h time frame or can use max on 4h time frame with 100 EMA is more better, but using bigger on bigger time frame is better, we need to understand its working, bigger EMa will be slow so how we can use them on smaller time frames which are fast? it will surely give us wrong signals if we know working of indicator we can decide easily when and how to use

5. The indicator that I think we should make use of for trend is moving average. However, if you are good with the use of support and resistance, then I can say that you don't need the indicator, because with price action support and resistance and the combination of candlestick, you could get to know how to take trades, when to open an order and when not to.

6. Originally Posted by Makaveli
The indicator that I think we should make use of for trend is moving average. However, if you are good with the use of support and resistance, then I can say that you don't need the indicator, because with price action support and resistance and the combination of candlestick, you could get to know how to take trades, when to open an order and when not to.
moving average is following market trend. i could agree more if moving average indicator is better to be used for trend breakout by taking their crossovers as the signal to trade. other than that, i always ignore and focus on my strategy by using news as my trend indicators. many news i've been trading in high impact did great movement in market with temporary effect or long term effect.

7. Originally Posted by Sascha
moving average is following market trend. i could agree more if moving average indicator is better to be used for trend breakout by taking their crossovers as the signal to trade. other than that, i always ignore and focus on my strategy by using news as my trend indicators. many news i've been trading in high impact did great movement in market with temporary effect or long term effect.
Moving average is a good indicator but now a days I am focusing more on bollinger bands, which also has moving average as its middle band. Further trend has always been my favorite kind of trading and I am certain that it is better way of trading than scalping or even swing trading. As I understand bollinger bands it can helps us to trade intraday and also to trade the trend.

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