Trend Market Conditions

The most simple and profitable signals are usually come from trend markets. My trading strategy gives signals for such market conditions and they are based on the classic principles of the trend-following trading. We open trades in the same direction as the main price movement, immediately after completion of correction. For opening trades we must have a bounce from trend lines and confirmation from other indicators that price reversed. Usually in such trades, we can have a good Risk/Reward ration like 1:2 or 1:3, and even get a lot of false signals, we could be in good profit. As you know, any market at any given time can be in one of two conditions - trend or range. And we need to have criteria that give a clear answer, what kind of trading conditions we have and what type of signals can be used for opening trades. And the main indicator that can identify trend market conditions is Moving Averages (MA).

We consider that the trend is up, when the MA with period 20 is above MA with period 50, and they both are above MA with period 100. MAs should rise in the same direction and have distance from each other. It’s standart rule of using MAs to determine the trend. We also consider that we have down trend, when MAs are arranged in such order MA100, MA50 and MA20. When the MAs are intertwined and have different direction, we have range market conditions. In this case, we must not use reversal signals from MAs. There are also cases, when it is possible to open trades based on trend signals, having only 2 MAs which move in the same direction. These cases can be in the beggining of new trend and deep corrections.

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