Trend Indicators
Trend indicators in trading evaluate the performance and outcomes of trading strategies by identifying market direction and strength. Here are some of the most commonly used trend indicators:
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- Simple Moving Average (SMA): Calculates the average price over a specific period, smoothing out fluctuations to show the overall trend.
- Exponential Moving Average (EMA): A weighted moving average that gives more emphasis to recent prices, reacting faster to trend changes.
- Moving Average Convergence Divergence (MACD): Measures the relationship between two EMA to identify trend direction and momentum shifts.
- Parabolic SAR: Plots points above or below price to indicate potential trend reversals and provide trailing stop levels.
- Average Directional Index (ADX): Quantifies the strength of a trend, regardless of direction, often used with directional movement indicators.