Trend following

Measure the direction and strength of a trend, using some from of price averaging to establish a baseline. As price moves above the average, it can be thought of as a bullish trend. When prices fall below the average, it signals a bearish trend.

  • Moving averages (lagging): Are used to identify current trends and trend reversals, as well as to set up support and resistance levels.

  • Moving average convergence divergence (MACD) (Lagging): Used to reveal changes in the strength, direction, momentum and duration of a trend in a stock’s price.

  • Parabolic stop and reverse (Parabolic SAR) (Leading): Used to find potential reversals in the market price direction.

Last updated