And the last but not least trading tool that can help us determine whether we are standing right in the middle of trending market is moving averages.
I know what you are going to think – I left the simplest answer for the last. I say that it is just desert – it is so delightful.
Using simple moving averages on your graph in order to determine the type of market you are in is easy – place a 10 period and 20 period SAMs on your graph. After that we need to wait for the point where the averages meet and in what direction all of them go further.
If all of the averages go up – congrats! You are in the up trending market.
In case all averages go down, you are in a down trending market… bummer.
If the averages do not go in the same direction you are barking at the wrong tree… I mean, you are not in the trending market at all.