Trending Markets

What are Trending Markets

Trending markets are ones that proceed in one primary direction over a sustained duration of time.

  1. In uptrend market Charts make higher highs and higher lows.
  2. The price is increasing above moving average in the time period.
  3. Price stay around all-time 52-week highs or highs.
  4. The candlesticks on the stock’s chart are bullish or green/white trend line.
  5. Increasing trend lines can connect higher highs and higher lows without any interruption.
  6. Moving averages are trending higher.
  7. Trading Volume grows as the chart moves higher.
  1. The chart makes lower lows and lower highs in downtreand market.
  2. Price is trending below the moving average in time range.
  3. Price moves around all-time lows or 52-week lows.
  4. The candlesticks on the chart are bearish, mostly red or black.
  5. Descending line trend can connect lower highs and lower lows without any interruption.
  6. Moving averages are going down lke a trend.
  7. Volume grows as the chart slides downward.

In stock market, iterative cycles of being volatile, range-bound, downtrends, and uptrends are normal phases.

A trader should focus on the signals for the trend in the timeframe they are trading in. A swing trader mainly focus in the 10-day moving average while a long-term investor should study the 200-day moving average.

Richard Weissman said -“The answer to the query, “What’s the trend?” is the question, “What’s your timeframe?”

Markets for backtesting trend trading signals?

  • Stock indexes: S&P 500, DJIA, Russell 2000,NASDAQ 100 etc.
  • Liquid stocks: Big caps stocks, small caps stocks, value stocks, growth stocks etc.
  • Bonds
  • forex and Currencies
  • Interest Rates
  • Energy: Natural Gas,Oil etc.
  • Metals: Silver, Copper, Gold etc
  • Agricultural: Wheat, Corn, Soybeans, etc.
  • Softs: Sugar, Cotton,Coffee etc.

What should trend followers trade?

  • Stocks
  • Option contracts
  • Futures contracts
  • Forex
  • Liquid Cryptocurrencies: BTC, DOGE, LCOIN ,ETH, ADA, SHIB etc
  • Mutual Funds
  • Exchange-traded funds (ETF)
  • Currencies

Also Read

Rules For A Breakout Trading Strategy


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