Trend Indicator

Trend indicators attempt to determine the direction of the trend. Price data is smoothed and the trend is represented by a single line, as in the case of a moving average. 

Trend Indicator

A Trend Indicator attempts to provide an objective measure of the direction of the trend.

 


Application of Trend Indicator

Trend indicators attempt to determine the direction of the trend. Price data is smoothed and the trend is represented by a single line, as in the case of a moving average.  Because of the smoothing process the indicators tend to lag price changes and are often called trend following indicators.



Most trend indicators lose money during a ranging market as fluctuations in a narrow price band tend to whipsaw traders in and out of their positions. Therefore  it is important to identify whether the market is trending or ranging and to employ indicators suited to the purpose: trend indicators for trending markets and the faster momentum indicators for ranging markets.

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