How to identify the direction of the trend in the stock market
Trend trading strategy has always been the most effective way to make money in the retail stock trading business. People who have in-depth knowledge about the stock trading business, always take the trades with the major trend. They know very well without learning to take the trades with the core trend, they will never learn to make regular profit in the retail trading industry.
Learning to trade with the major trend is not a tough task. If you go through this article, you will learn some amazing techniques by which you can find the major trend with a high level of precision. So, without any delay, let’s about the important market details.
Selecting the time frame
The majority of the stock traders fail to identify the direction of the trend as they rely on a lower time frame. In the lower time frame, you are just going to see a partial picture of the market. If you want to become good at trading, we strongly recommend that you learn to select the time frame with a high level of precision. Once you become good at analyzing the time frame, you should be able to find the highs and lows of the market. Based on the highs and lows, you will be drawing the major trend lines in the trading industry.
Drawing the trend lines
To find the perfect trend in the market, you should be doing the data analysis with the top brokers like Saxo capital markets. By choosing a good broker in the data analysis process, you can easily draw the bullish and bearish trend lines in the market. Though it is a bit challenging at the initial stage once you become good at connecting highs and lows, you will never feel frustrated with the trend lines that you have drawn in the market. But remember, you should never force join the highs and lows of the market. If you do so, you will get a faulty trend line and thus you won’t be able to make a profit by using such tools.
Using the 100-period moving average
Smart traders always use the 100-period moving average to find the high-quality trades signals in the market. But do you know that you can also use the 100-period moving average to find the direction of the trend? If the 100 period moving moves with a positive slope, you should be expecting a bullish rally in the market. On the contrary, when the slope is negative for the moving average, you should be expecting a bearish rally in the market. Based on the direction of the moving average, you should get a clear idea about the direction of the major trend.
Using the news data
Analyzing the news data and finding the direction of the trend in major stocks is one of the most advanced ways to find reliable trade signals. Most novice traders do not pay any attention to the news factors. But the professional traders always pay special attention to the news factors as they know it will provide them the best possible way to find reliable trade signals in the market. So, learn to analyze the news data and merge it with the technical variables. By doing so, you should be able to predict the direction of the trend with much more accuracy.
Use of chart pattern
Some traders often use the chart pattern to find the direction of the major trend. Though it is a bit more advanced trading technique by learning this method, you can even protect yourself from the major reversal. So, learn to evaluate the major chart patterns in the higher time frame. If possible use the candlestick pattern along with the chart pattern. Once you become good at this, you should be able to make a regular profit as finding the direction of the trend will become much easier.