Trending markets are ones that proceed in one primary direction over a sustained duration of time.
Signals for an Uptrend market In Market Trends :
- In uptrend market Charts make higher highs and higher lows.
- The price is increasing above moving average in the time period.
- Price stay around all-time 52-week highs or highs.
- The candlesticks on the stock’s chart are bullish or green/white trend line.
- Increasing trend lines can connect higher highs and higher lows without any interruption.
- Moving averages are trending higher.
- Trading Volume grows as the chart moves higher.
Signals indicating a downtrend market in Trending Markets :
- The chart makes lower lows and lower highs in downtreand market.
- Price is trending below the moving average in time range.
- Price moves around all-time lows or 52-week lows.
- The candlesticks on the chart are bearish, mostly red or black.
- Descending line trend can connect lower highs and lower lows without any interruption.
- Moving averages are going down lke a trend.
- 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.
- 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?
- Option contracts
- Futures contracts
- Liquid Cryptocurrencies: BTC, DOGE, LCOIN ,ETH, ADA, SHIB etc
- Mutual Funds
- Exchange-traded funds (ETF)