COMMON TRENDING INDICATORS

Most common trending Indicators

Traders always attempt to extract profits from trade movements. Trend trading tries to capture the most out of market movements through the analysis of an asset's momentum in certain particular direction through multiple ways. 

Trading is not about getting the golden 100% accurate indicator, but just a method and technique that can maximise your profits. 

Obviously, there is no single technical indicator that will punch your ticket to market riches. Traders also need to be well-versed with scribing a trading plan, trading psychology and risk management. Though certain strategies have consistently proven to be profitable, traders must take caution to be disciplined and follow their trading plan alongside using indicators.

Moving average is another technical analysis tool like any other that smooths out price data by creating a constantly updated average price.

Moving average lines creates a single, a flat line that effectively eliminates any variations due to price fluctuations.

The average (according to the trader's choice) is taken over a specific period of time–10 days, 20 minutes, 30 weeks. For long-term traders, the 800-day, 200-day, 100-day, and 50-day simple moving average are considered as ideal.

Firstly, to utilize moving average, look at the angle of the moving average. If it is mostly moving horizontally, then the price is ranging.

A trading range occurs when a security trades between consistent high and low prices for a period of time. If the moving average line is angled up, an uptrend is underway while down trend is shown by angled down moving average. 

Moving Average (MA) crossovers is another trading strategy. A 200-MA and 50-MA moving average on trading chart may indicates a BUY SIGNAL when the 50-MA crosses above the 200-MA. Ontheotherhand, a SELL SIGNAL (shown by the black arrow below) may occurs when the 50-MA (pink line) crosses below the 200-MA (black line).

Also, when the price crosses above a moving average, it can also be used as a buy signal, and when the price crosses below a moving average, it can be used as a sell signal. In all this, the trader can change the time frames to suit their analysis.

Moving averages can also provide support or resistance to the price as shown in the chart below (blue circles) when a 100-day moving average is acting as support when the price frequently bounces off from it.

IMPORTANT:

• Moving averages just simply reveal what the price is doing, on average, over a period of time and don't make future price predictions.

• Since the price is more volatile than the moving average, this method is prone to more false signals but just used to predict future market movements.

• Indicators simplify price information, provide trend trade signals and providing warnings about reversals. They can also be used on all time frames and can be adjusted to suit each trader's preferences. Traders may combine indicator strategies–or build their own strategy of market entry and exit before opening or closing any trade.