Trend and trend detection

Using Moving average in forex market

Trend

It is the direction of market move. Market is moving all the time, sometime it moves faster and
sometimes slower, Slow movement is comparatively stasis to that of fast movement.

So market moves Trend -nontrend-trend-nontrend-trend

If you see trend you have keep in mind that non trend movement is waiting of your trading time frame.
On the other hand if you see market on consolidation /non trend you may think trend is coming.

Big movement comes after big consolidation.

Market spend most of the time here in consolidation, it is more than 50 % of time

Trend:

it is the direction of market move of that time frame,

unique

takes less time then non trend/stasis/ collapse stage

Market spend only 30% time in trend.

Most of the new trader loss in trending market

How to identify trend:

There are may way to indentify trend , many indicators are used to identify trend, these are as follows.

Trend line

Trend channel

Moving average(200,100,50,21)

Moving average cross over

Bollinger band(20,2)
Trend filter:

Some indicator do not gives clear idea of trend but used with trend indicator to reduce noise in trend.

CCI

ADX

RSI

Stochastic

MACD

About time frame:

Day trader use

1hrs chart for determination of trend

15 mins for trading

5 min chart for fine tune entry

I use :

4 hrs chart for trend determination

1 hrs chart for trading

15 min chart for Entry

Intermidiate term trader use:

1 day chart for trend

4 hrs chart for trading

1 hrs chart for entry

Long term trader:

1 WK chart for trend

1day chart for trading

4 hrs chart for entry

The higher the time frame more accurate the trend identification

Moving average:

Most popular MA are 9,21,50,100,200

Used to identify trend and trend strength

Cross over ,

when two moving average crosses new trend is going to start, actually trend start before cross over , as
MA is lagging indicator it show the change after happen. Yet that when a new trend begin it will continue
for some extent so we can put entry order with tight stop loss. See the picture below

Trend up: when 21 MA cross 50 MA from below to up,

Trend down: when 21 MA cross 50 MA from above to down

When price below MA it is down trend

When price above MA it is up trend

Trend strength:

In cross over, increase the acuteness of cross over in crease strength, the large angle formed in cross over
the more strength,

The more steppy MA the more strength.

Look at the picture below

NB:In any trend condition price never moves straight up or down, it moves up till supply less then
demand, when supply exceed than demand price goes down but will go up when demand will exceed
the supply. This is the basic of price in supply and demand theory.

Look at the picture below:

Trend down, price is moving down then it comes up to certain extent and then go down. This the
nature of price, it is due to supply and demand imbalance.
Never move with the price like wavy pattern. Determine trend in higher time frame such as 4 hrs chart
and trade on 1hr chart, and put fine entry 15 min chart. Lower time frame produce more noise than
higher time fame, look at the picture below
Trend reversal:

It is important to know when the trend will end to protact your profit minimize loss.I will discuss in
next up coming sheet e book.

Dr Nizam,PhD

Expert trader ,trading forex since 2010 with success

Email: nizammozumder@gmail.com