adamsmiths
Newbie
In order to earn profits, trend traders rely highly on trends prevailing in the market. There are a number of trend indicators that help trend traders to analyse the market and recognise the profitable situations. But if you want to be a successful trend trader, you have to know how to use a combination of indicators. There are some common indicators that are used by almost all trend traders to trade successfully in different market conditions. A few indicators are discussed below that should be used by all trend traders (Information Courtesy- easyMarkets).
1. Moving Average or MA
The very first indicator that should be used by every trend trader is the moving average or MA indicator. Because of its accessibility and effectiveness even the beginners can use this with ease. Generally, moving average is measured by adding the prices over the time and then dividing it by time frame. For instance, if you want to measure the 20 day simple moving average, you have to add the closing prices over the 20 day period. And then the sum will be divided by 20 to get an average. This indicator helps to smoothen out the noise in the market that is caused by continuous price fluctuations. Moving average can be classified into two types. They are – simple moving average and exponential moving average. Traders also use moving average crossover to identify the buying and selling signals.
2. Moving Average Convergence Divergence or MACD
The moving average convergence divergence or MACD is basically an oscillating indicator that fluctuates above and below zero. This indicator is known as the trend as well as momentum indicator. MACD is a lagging indicator that means it follows the trend. On the basis of the moving average, you can calculate MACD. You can find a signal line in this indicator. You have to find out on which of the zero the MACD line is situated. If you find that the MACD line is above the zero for a long period of time, the trend is expected to stay up. If the line is found below zero, the trend is expected to stay down. There are two other MACD lines that are known as fast line and slow line.
3. On Balance Volume or OBV
OBV or on balance volume also plays an important role for trend traders. This indicator compiles all the information into a one-line indicator. With the help of this trend indicator, you can calculate the cumulative pressure of buy and sell. In order to calculate the cumulative pressure, the volume on the up days is added and the volume on losing days is subtracted. This technical indicator also helps the traders to trade trend under ideal situations. It is directly proportional to the prices, so when the prices rise, OBV also rises and vice versa.
Indicators are the perfect tools to help in filtering the price information. They also provide valuable trade signals and different signs of trend reversals. So, if you want to grow your career as a trend trader, learn how to use the above discussed indicators that will help you to create a strong trading strategy.
1. Moving Average or MA
The very first indicator that should be used by every trend trader is the moving average or MA indicator. Because of its accessibility and effectiveness even the beginners can use this with ease. Generally, moving average is measured by adding the prices over the time and then dividing it by time frame. For instance, if you want to measure the 20 day simple moving average, you have to add the closing prices over the 20 day period. And then the sum will be divided by 20 to get an average. This indicator helps to smoothen out the noise in the market that is caused by continuous price fluctuations. Moving average can be classified into two types. They are – simple moving average and exponential moving average. Traders also use moving average crossover to identify the buying and selling signals.
2. Moving Average Convergence Divergence or MACD
The moving average convergence divergence or MACD is basically an oscillating indicator that fluctuates above and below zero. This indicator is known as the trend as well as momentum indicator. MACD is a lagging indicator that means it follows the trend. On the basis of the moving average, you can calculate MACD. You can find a signal line in this indicator. You have to find out on which of the zero the MACD line is situated. If you find that the MACD line is above the zero for a long period of time, the trend is expected to stay up. If the line is found below zero, the trend is expected to stay down. There are two other MACD lines that are known as fast line and slow line.
3. On Balance Volume or OBV
OBV or on balance volume also plays an important role for trend traders. This indicator compiles all the information into a one-line indicator. With the help of this trend indicator, you can calculate the cumulative pressure of buy and sell. In order to calculate the cumulative pressure, the volume on the up days is added and the volume on losing days is subtracted. This technical indicator also helps the traders to trade trend under ideal situations. It is directly proportional to the prices, so when the prices rise, OBV also rises and vice versa.
Indicators are the perfect tools to help in filtering the price information. They also provide valuable trade signals and different signs of trend reversals. So, if you want to grow your career as a trend trader, learn how to use the above discussed indicators that will help you to create a strong trading strategy.
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