The Best Trend Indicators for Technical Analysis can help you find stocks that are poised to go higher. So what are the best technical analysis trend indicators you can rely on? Well, you’ve come to the right place…
In this short blog post we’ll look at some of the best trend indicators for technical analysis. I’ll show you how I use these trend indicators and how you can use them to improve your trading too. So by the end of this post you should have a strong grasp of which technical analysis indicators can help you find stocks trending higher.
Technical Analysis of Trends Using Price Action:
One of the best trend indicators for technical analysis is the price action of the stock. I know you might have been looking for something fancier, but the truth is that just looking at the price of the stock can give you a lot of indication as to the current trend. And by definition, technical analysis is concerned first and foremost with the price and volume of a stock. But…
What makes a trend?
Generally speaking, a stock is trending up if it is making higher highs and higher lows. Conversely, stocks are trending down if they’re making lower highs and lower lows. The strength and severity of the trend will also depend on the timeframe. To find the strongest trends you want to find stocks that are trending up on five minute, hourly, daily, weekly and even monthly time frames. The more all of these trends line up across time frames the stronger the trend will be. So by just paying attention to the relative price of peaks and troughs you can usually nail the trend of most stocks.
So how do use this technical analysis of price action to identify trends and profits?
If a stock is trending up across multiple time frames and there are no immediate fundamental headwinds to the company, you can feel relatively confident by trying to “buy the dip” when it comes in to make a higher low. Can you start to picture how that might look and how you can use price action as an indicator for technical analysis trends?
But if you want to go a step further than looking only at the price change of a stock, let’s take a look at the best technical analysis indicator or tool for finding trends
Technical Analysis of Trends Using Moving Averages:
Moving averages are one of the most popular technical analysis indicators or tools. And since they are calculated by using price from the last 10, 20 or 200 days, they are basically just an easy way to visualize the technical price trends described in the paragraphs above. But there’s one thing you should keep in mind.
Most beginning stock traders use moving averages as absolute reference points, rather than technical analysis trend indicators. This is a mistake. Moving averages are not really meant to measure support or resistance levels for a stock. Instead, the important thing to watch is the slope of the moving averages relative to one another. What do I mean by that? Take a look at the chart below…
By looking at the SPY chart above, you can tell that the stock market is in an uptrend. This is especially clear when you consider the slopes of the moving averages relative to one another. If all of the moving averages are lined up nicely as above, that’s indicative that stocks have been trending up consistently for extended periods. On the other hand…
If your stock has a 20 and 50 day moving average that is sloping up, but a 200 day moving average that is still sloping down, then this is indicative of an emerging trend – or a countertrend rally within the context of a strong downtrend. Make sense? Use the moving averages together to get a clear indication based in technical analysis of the strength of the trend.
Now if you want to see the best trend indicators for technical analysis in action, just check out this short technical analysis video below:
Best Trend Indicators for Technical Analysis [VIDEO]:
So while there are more technical trend indicators than you can shake a stick at, I like to keep things simple. In my opinion, the best technical analysis indicator for trends is moving averages because they are a simple visualization of the price action of a stock. Make sense?
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