The moving average is a trend indicator that “summarizes” past prices and is plotted as a line on your chart. Trend indicators #3: How to use moving average to identify the direction of the trend and the strength of it But for precise entries, exits and trade management, it’s best to stick with candlestick or bar charts. In my opinion, a line chart is useful to identify the direction of the trend. This means you won’t know what the high/low of the candle is - and this will hamper your trading decisions. You must know that line chart only considers the closing price. If the line is pointing lower, it’s a downtrend. If the line is pointing higher, it’s an uptrend. So, you’ll see a squiggly line on your chart which makes it easier to identify the trend.Īnd here’s how you can interpret line charts: It shows the price on your chart by taking the price at the close and then connects the closing prices together via a line. Let’s move on… Trend indicators #2: How to tell the direction of the trend without using a candlestick chartĬandlestick charts can get messy if the wicks are long which makes it difficult to identify the trend (especially for new traders). So in the next section, you’ll learn how to identify the direction of the trend without using candlestick charts. Sometimes it’s difficult to identify the direction of the trend based especially when the candlesticks are “flying” all over the place.
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