Trend |
The most
important aspect in trading the market is trend. The only "Holy Grail"
of trading is -- Trade with the trend; if it is up, buy the dips; if
it is down, sell the rallies. We use four indicators to help identify
trend and trading trend. Once trend is identified, cycles are used to
buy bottoms in the direction of trend, if up; or sell tops in the direction
of trend, if down. Also, using cycles, we can anticipate trend reversals. |
| Click here to see how this group of trend indicators are used to determine trend. A
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Dynamic
Trend Indicator (DTI)
The
Dynamic Trend Indicator is a longer-term trailing stop based on
the next longer time frame, yet plotted on the chart you are trading.
It shows the trading trend based on the next longer time frame.
Trades should generally be entered in the direction of this trend
indicator.
The
Dynamic Trend Indicator defaults to a magenta line in the price
panel showing the trend direction. |
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EMA
Trend
In trading, trend is all important.
The direction of the longer-term cycle sets the trend for the shorter-term
trading cycle. The EMA Trend indicator visually shows when market
momentum is up and the longer-term trend is up. It also shows when
a market is weak and longer-term trend is likely to continue down.
The
safest trades most often occur in the direction of trend. When it
is up, buy the dips (cycle bottoms); and when it is down, sell the
rallies (cycle tops). This indicator will help identify high probability
Trade Entry Buy Signals in an uptrend, and high probability Trade
Entry Sell Signals in a downtrend.
When
the red line is above the blue EMA line the trend is up. When a
cycle bottom is made and the red line remains above the blue EMA
line as a Trade Entry Buy Signal is generated, an up move can often
be expected into the cycle high. |
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the red EMA line is below the blue EMA line, the longer-term trend
is down. When a cycle top is made and the red EMA line remains below
the blue EMA line as a Trade Entry Sell Signal is generated, a downmove
can often be expected into the cycle bottom. |
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EMA plots in the price panel as red and blue lines moving in and out
of prices. |
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EMA
%Diff
The
actual trading trend is best shown by the EMA % Diff, which is the
percentage difference between the red and blue EMA lines. When the
EMA %Diff is moving up, the trading trend is up; when moving down,
the trading trend is down. The oscillator generated Mechanical Buy/Sell
signals should generally be taken in the direction of the EMA %
Diff. Certain patterns in the EMA % Diff can also help confirm trading
cycle tops and bottoms.
The
EMA %_Diff plots as a thin red line in the price panel showing the
direction of the trading trend. When this indicator is first plotted,
it will often show in a separate sub-graph. Move it into the price
panel by pointing the arrow prompt on the red line, left clicking
and dragging it up to the price panel. |
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MA%Diff
The
calculation for this indicator is the same as the EMA %Diff, except
the MA%Diff uses regular moving averages, which makes it less responsive
than the EMA% Diff. The resulting divergent patterns help identify
cycle tops and bottoms.
The
MA %Diff plots as a green line in the price panel showing the direction
of the trading trend. When this indicator is first plotted, it will
often show in a separate sub-graph. Move it into the price panel
by pointing the arrow prompt on the greem line, left clicking and
dragging it up to the price panel. |
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Trend
Buy/Sell Signals
The Trend Buy/Sell Signals only generate entry signals in the direction
of trend. This provides an initial entry signal with a very high
probability of being a successful trade, and prevents you from trading
against the trend.
The
Buy/Sell Signals are generated only in the direction of trend.
The old adage "trade with the trend; if it is up, buy the dips;
if it is down, sell the rallies" is now applicable with the Trend
Buy/Sell Signals. The trend is set by the EMA Trend Indicator --
the dips are cycle bottoms; the rallies, cycle tops.
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