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Trend Indicators: the Most Effective Ones to Use

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Trend trading is a universal choice for almost any stock investor, regardless of his experience or activeness. Do you want to detect and understand market tendencies better and learn to make profits on them? Then, be sure to read our guide on the most beneficial indicators to apply within this approach.

So, as you have probably understood, this approach assumes that a trader must analyze current market trends to decide which positions to open and when. Namely, when a chart shows that a certain asset is heading up, most investors open long positions, and vice versa. But that is a simplified description. In practice, one needs to monitor an extensive variety of technical trend indicators to determine the prospects of a certain asset.

Here are the most commonly-used ones to master in the first place:

  1. Moving Averages. It shows when it is time to close the current trade. As long as the price is either below or above it, you can keep the deal open.
  2. Relative strength. It is commonly utilized to determine overbought and oversold levels. When this indicator rises upwards, it is time to sell the asset, in the opposite situation ― the system will prompt you to make a purchase.
  3. Price action. This tool analyzes the current behavior of an asset to provide forecasts regarding its price movements in the future.
  4. Multiple Time Frame. These signals allow determining whether the trend within the current time frame conforms with the general trend.
  5. Bollinger Bands. It is a complex indicator, where the central line reflects a moving average, and the upper and lower lines mark standard deviations. So, when the value of an asset is between the upper and central lines, it is time to buy, but when the price moves below the central line, you will be prompted to sell.
  6. Advance-Decline Line. It reflects the ratio of rising and dropping stocks. If, within the current session, there are more rising stocks, then, this indicator will move upwards, and vice versa.
  7. Stochastic Oscillator. Another indicator aimed at reflecting oversold and overbought levels along with upper and lower bands. So, when its two lines cross below the lower band, it is a sell signal. The opposite situation is a sign to buy. And, when these two lines go upwards after crossing with each other, that indicates a bullish trend.
  8. Ichimoku Kinko Hyo. This instrument can be used to predict reversals (when the conversion line and the base one cross) or to determine bullish trends (when the price is above the lagging line or Ichimoku cloud).

In sum, including such indicators in your strategy is a wise decision, but you should not rely exclusively on this tool, be sure to complement it with decent research and comprehensive market analysis.