Tag: best trend indicators

The Best Trend Indicators

Fabian FabianLatest News / Latest News / NewsLeave a comment

The Best Trend Indicators

As a newbie trader one of the most important things that you will need to learn is exactly how to identify trends, and how to identify the direction of a trend. If you as a newbie trader learn how to identify the direction of trends, your chances of being successful in the world of trading greatly increase. Now, what is important to note is that in order to identify a trend and the direction of the trend, you should be using the best trend indicators out there, and yes this is in part what we are here to discuss today.  

However the problem when it comes to identifying trends and their directions is that one type of trader might see an uptrend whereas another type of trader might see a downtrend. a daily chart could look like there is an uptrend occurring, whereas an hourly chart could look like there is a downtrend occurring. Let’s get right to it and take a look at some of the best trend indicators out there, as well as how to use them, and what you need to avoid doing in order to make money when trading.

Trend

Identifying a Trend

One of the important things to note here is that a trend can look more like an illusion than anything else. The reason we say that a trend looks like an illusion is because depending on what your time frame is like, a trend can look very different. For instance, if you are looking at a 5 minute chart or a 15 minute chart it could appear as though there is a trend in the upward direction.

However, if you look at the daily chart for that very same asset, it might appear as though there is a downtrend occurring. the bottom line here is that when it comes to trends and trend indicators, it really depends on what kind of time frame you are using.

For instance, if you are a day trader, you should be using 30 minute timeframes and lower. As a swing trader you should be looking at one hour timeframes and four hour timeframes, and everything in between. If you are a position trader then you should be looking at 4 hour timeframes and above.

Using Price Action to Identify Trend Direction

Price action is all about reading the structure of a market, the momentum of a trend, and the sentiment to identify trading opportunities. In terms of trading, price action is one of the most important things that you need to learn because it provides you with extremely valuable insight to the market that you are currently trading in. Price action can tell you where traders are placing their stops and when new traders will enter the market.

There are three things to remember when it comes to price action, including that an uptrend consists of higher highs and lows, that a downtrend consists of lower highs and lows, and that arranges contained between the lows and the highs. with all that being said, identifying the direction of a trend when candle sticks are going all over the place can be difficult, so in the next section we’re going to learn how to identify a trend without using candle sticks.

Trend

Identifying Trend Directions Without Candlesticks

When there are tons of candle sticks with really long wet Wicks facing in all sorts of directions, things can be really messy, and it can make it hard for newbie traders to identify the direction of the trend. The simple solution to this problem is to use a line chart. For those of you who don’t know what a line track is, it is a chart that takes the price at the close and then connects closing prices together via line.

This takes the form of a squiggly on your chart that is much easier to read than those candle sticks. It’s pretty simple to read because if the line points higher than there is an uptrend, and if the line points lower than there is downtrend, and if the line is flat then it is arranged. However, with that being said the line tribe only considers the closing price, and that means that you won’t know what the high and low of a specific candle is, and this can be problematic. for identifying entries and exits using candle sticks or bar charts is best.

Using Moving Averages to Identify Trends

For those of you who don’t know, moving average is an indicator that summarizes the past prices, and is then plotted on your chart as a line. Sure, the moving average is a lagging indicator, but it’s not totally useless because it can help you identify the direction of a trend. a very simple technique to use is this, if the price is above the 200 MA line then there is a long uptrend but if the price is below the 200 MA line then there is a long downtrend.

You can also use a shorter term moving average, for instance if there is a strong trend the price will usually stay above the 20 ma line but in a healthy trend the price usually stays above the 50 MA line. Keep in mind that the moving average works best in a trending market. However if there is a range, then the moving average does not work very well.

Trend MA

Using Trend Lines to identify Trends

A trendline is a specific type of tool that you can draw on your charts, and it helps you identify both the strength and direction of a trend. When it comes to drawing trendlines, what you need to do is to look for at least two swing points, and then connect the swing points using a trend line, and then get as many touches on the trendline as humanly possible.

In terms of interpreting a trend line, if the line points higher than it is an uptrend, and if the line points lower than there is a downtrend. What you also need to pay attention to here is the angle of the trend line because the steeper the trendline is the stronger the trend is, and the flattered the line is the weaker the trend.

Trend Trendlines

Trends & Trend Indicators – Final Thoughts

Now that you know what the four best types of trend indicators out there are, you can start easily identifying both the direction and the strength of a trend, with the hopes of you making consistent profits on a daily basis.

If you need help day trading, and what you need is a comprehensive education, particularly on Forex trading, then the best place to be is the Income Mentor Box Day Trading Academy. At this time, the IMB Academy is the most comprehensive, user friendly, effective, and affordable Forex trading school out there.  

CLICK BELOW TO JOIN INCOME MENTOR BOX AND START MAKING REAL PROFITS! 

MACD Indicator Trading Guide

Fabian FabianLatest News / Latest News / NewsLeave a comment

MACD Indicator Trading Guide

If you are trading stocks, forex, cryptocurrencies, or anything in between, then one of the things that you absolutely need to know how to do is how to perform technical analysis. Now, when it comes to technical analysis indicators, one of the most important ones that you need to know about is the MACD indicator.

The MACD Indicator is an extremely useful tool when used in the world of technical analysis. It can provide you with a whole lot of information in relation to the direction of a price of a security or asset.

If you do not know what this indicator is, how it works, what it tells you, or how to calculate it, then no worries, because this is exactly what we are here to teach you today. Let’s get right to it and provide you with a newbie trading guide for the MACD indicator.

What is the MACD Indicator?

For those of you who don’t know, MACD actually stands for Moving Average Convergence Divergence. Now, although this may sound like a very complicated technical indicator to master, it is actually fairly simple. All of the MACD indicator does is measure the relationship of exponential moving averages or EMAs.

When you look at this indicator, when attached to a chart, you will see that it displays three lines. It displays the MACD line, which is a blue line, a signal line, which is a red line, and a histogram, which is a green line. The main goal here is to illustrate the difference between the MACD and signal lines.

To put this in technical terms, the moving average convergence divergence indicator is the difference between two moving averages that have been exponentially leveled, and these are generally on the 12 and 26 day periods, with the signal line usually taking the form of a 9 period exponentially smoothed average of the moving average convergence divergence line.

One of the main things that the MACD indicator does it to function somewhat as an oscillator, because it provides you with both oversold and overbought signals, which are either below or above the zero line, with MACD lines generally wavering around that same zero line.

 

What does the Moving Average Convergence Divergence Indicator Tell You?

OK, so something that you are probably wondering here is what exactly the MACD indicator has the ability to tell you. So what you need to know here is that the moving average convergence divergent syndicated is one of the most versatile technical analysis tools out there, and the reason for this is because it has the ability to measure two different things.

What you need to know here is that indicators are generally divided into four categories, which are trend, momentum, volume and volatility indicators. While this particular indicator is actually both a trend indicator and a momentum indicator combined into one which therefore makes it extremely useful. Below we have listed some main points in terms of exactly what this indicator tells you and what it means when it looks a certain way.

  • When the moving average convergence divergence’s line crosses above the zero line, the signals are in an uptrend. Traders usually take this as an indication to place buy trades.
  • When the MACD these line crosses below the zero line, the signals are in a downtrend. Traders usually take this as an indication to place sell trades.

MACD

Pros & Cons of the MACD Indicator

Yes, the moving average convergence divergence indicator is of course an excellent one to use for technical analysis. However, as is the case with all indicators, there are both advantages and disadvantages to using the MACD.

Pros
  • The fact that it is both a trend and momentum indicator is of course a big bonus.
  • When using the MACD crossover and the divergence, this indicator provides you with very clear and accurate buy and sell signals.
  • For increased clarity, this particular indicator can be used along with other tools and indicators.
Cons
  • It is sometimes the case that this particular indicator may provide false signals, especially when it comes to reversals. Sometimes something that looks like a reversal with this indicators as actually just a sideways movement or a pause before the same trend continues.
  • It is also sometimes the case that this particular indicator doesn’t provide 100% accurate analysis of trends. Sometimes trend following signals may fail. Sometimes these signals may also not move enough before a trend reversal.

 

MACD - Wikipedia

Calculating the Moving Average Convergence Divergence

Although this may all seem very complicated, the fact of the matter is that calculating the MACD is not actually that hard. Keep in mind that this following calculation is using the 12. And 26. Timeframes as the moving average convergence divergence indicator usually uses.

  1. First, calculate the 12 period EMA for the price at a chosen time.
  2. Calculate the 26 period EMA for the price at a chosen time,
  3. Subtract the 26 period EMA from the 12 period EMA.
  4. Based on the result obtained in step 3, calculate a 9 period EMA.

MACD

 

FAQ

  1. What is the Best MACD Setting for Day Trading?

Generally speaking, the MACD is set to 12, 26, and 9, as we have spoken about in great detail above. However, if we are talking about the best settings, these are considered to be 5, 13, 1, as these provide you with a visual representation of MACD patterns. However, some people love the sensitivity provided by 5, 35, and 5 settings.

  1. How is MACD calculated?

Generally speaking, the 26 period EMA is subtracted from the 12 period EMA (or the 13 from the 5), the result of which is the MACD line. A nine day EMA (or 1 day), of the moving average convergence divergence line, called the signal line, is plotted on top of the MACD line, which then functions as the trigger for buy and sell signals.

  1. How Accurate is MACD?

When it comes to technical indicators for day trading, the MACD indicator is quite accurate. Generally speaking, you can expect it to be accurate upwards of50% of the time, which is quite good as far as indicators go. You can of course improve this accuracy level if you use this indicator along with others.

The MACD Indicator – Final Thoughts

There you have it folks. You should now know all of the basics about the MACD indicator so you can start using this technical analysis tool on a regular basis. It is one of the better technical analysis tools out there, particularly in terms of trends and momentum, so we definitely recommend mastering it.

Remember folks, if you need help day trading, and what you need is a comprehensive education, particularly on Forex trading, then the best place to be is the Income Mentor Box Day Trading Academy. At this time, the IMB Academy is the most comprehensive, user friendly, effective, and affordable Forex trading school out there.  

CLICK BELOW TO JOIN INCOME MENTOR BOX AND START MAKING REAL PROFITS!