Trend trading indicator is a trend following the trading system and generates good trades in any forex pairs and all time frames. This indicator is based on Moving average crossover and Moving average Bands, line chart.
In this trading system, the moving averages are used in many different ways to capture the trend. Entries are based on candle patterns and exit is based on the momentum of the price action. Let’s try to understand the working of this trading system.
Trend Trading Indicator Overview
Trend trading systems are based on the idea that price action will continue to move in the same direction as it is currently moving. So if prices in an uptrend, long trades are more likely to work. If the market is in a downtrend then short trades are more likely to work. In the case of a sideways market, the buy low and sell high strategy will generate more profit.
Trend Trading Indicator Explanation
In this system line chart is plotted on the different panels along with moving average bands. Line chart plots only the closing price of the price action and it’s easy to analyze the trend from the line chart.
A simple moving average for 20 periods is plotted along with a line chart. If the slope of the band is up then traders should do only long trades and if the slope of bands is down then short trades are more beneficial to do.
20 EMa along with 45 EMA works as a filter for taking entries. Traders can take entry when price give pullback at those moving average and form aby candle pattern.
Trend Trading: Buy Conditions
- Price should give breakout from moving average band.
- The slope of bands should be rising.
- 20 Ema Should move above the 45 periods moving average.
- Entry is when price takes support and forms any reversal pattern at any moving average.
Trend Trading: Sell conditions
- Price should give a breakdown from the moving average band.
- The slope of bands should be down.
- 20 Ema Should move below the 45 periods moving average.
- Entry is when price takes resistance and forms any reversal pattern at any moving average.
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