Forex Trading Indicators To Spot Trends (How To Identify & Follow The Trend)

What’s up Traders, in this article, we’re going to be talking about Forex Trading Indicators To Spot Trends (How To Identify & Follow The Trend).

In this article I will show you five ways to identify the dominant trend on a trading instrument, whether is a stock, a currency pair or a CFD, so you can stay on the right side of the market when you are day trading.

200 EMA + 600 EMA (5 min chart)

The first technique takes into account the 200 EMA and 600 EMA on the 5 min chart. We’ll use the 200-period exponential moving average as an indicator to determine the short-term trend and the 600-period exponential moving average to determine the medium-term trend.

600 EMA on the 5-min chart is the same with 200 EMA on 15-min chart, so basically we are following the 200 EMA on the 5-min and 15-min charts. That’s a little trick to follow one of the most efficient moving average on 2 timeframes, without having to change charts.

So, on order to identify the trend, the 2 exponential moving averages must not cross During the previous day or days, because as day traders, our aim should be to trade only the strongest trends. If the EMAs will cross, then we will most likely enter a trading range.

Let’s take a look at this Visa 5 minutes chart. If we want to identify the trend, we just have to look back in the previous 1 or 2 days. If the moving averages do not cross, we have a valid trend and we could start searching for long entries.

The 2 EMAs only confirm the Market Trends

Here is a downtrend on the Verizon Communications stock. Take into account that a moving average is a lagging indicator, and the 2 EMAs don’t predict new trends, just confirms the market trends once they have been developed.

In this chart, we see no crossover between them, and we can assume that we are in a downtrend.

When you see a crossover or multiple crossovers between the EMAs in the previous day, like In this Netflix chart, abandon the setup, because you will most likely enter the market when it’s in a range and go search for other day trading opportunities.

Main central daily Pivot point

The second technique takes into account the main central pivot point of the day. Pivot points represent levels that are used by floor traders to determine directional movement and potential support/resistance levels.

They became popular once traders on the floor exchanges began to use them. In order to identify the trend, I just focus on the central pivot point. The central pivot point represents the intraday point of balance between the buyers and sellers and is usually where the largest amount of trading volume takes place.

Here’s how I determine the main trend. I prefer to compare the value of the main pivot point with the value of the previous day.

If the current pivot point is higher than the previous one, I consider this a good indication of an upward trend and look only for long positions. If the current pivot point is lower than the previous one, I consider taking only short entries, because we are in a potential downtrend.

I also take into account the distance between the main pivots (the range between them). Pivots drawn with a larger distance between them indicate a trending market.

Pivots drawn at a short distance one from another, indicate a possible range.

I avoid trading on markets where the most recent pivots are close, as it will most likely stay flat and offer low probability entries, like in this AT&T chart.

Ichimoku Kumo cloud

The third technique involves the Kumo cloud of the Ichimoku indicator. The Kumo cloud offers a unique perspective of support and resistance, representing these levels based on price action.

The longer the price stays below/above the Kumo cloud, the stronger the trend is. When the cloud is wide, the expected support or resistance is strong. When the cloud is thin, the expected support/resistance is weak.

If I want to see if the markets are trending or not, i want the Kumo cloud to keep its color. So, i want to see green in the last 1 or 2 days, without any red, like in this exon mobile chart.

And here’s a great downtrend. Observe the Kumo cloud keeping its red color, the price stay below the cloud and the cloud is pretty wide, meaning that the trend is a strong one. When you see this on your charts that it’s a pretty strong indication that the market is in a range.

So, when the price breaks below and above the cloud and the cloud changes its color, often search for better opportunities on other instruments.

ADX line on 30-min chart

The forth technique takes into account the ADX line on the 30-min chart. ADX is one the most reliable indicators to anticipate the beginning of new trends or a continuation of the current ones.

What I like about average directional movement (ADX) is the fact that it measures trend strength and shows trend direction at the same time.

When the ADX stay above 25 the level for several days, trend strength is strong enough for strategies involving trend following. I check the ADX line in the previous 1-2 days, and if I see that it clearly stays above 25 level, we might have a good trend to ride.

Remember, that ADX in non-directional, does not distinguish between uptrends and downtrends.

So look for higher highs and lower lows and ADX above 25 level for uptrends, like in this example.

And lower lows and lower highs and ADX above 25 level for downtrends, as you see on this chart.

Slope of the Keltner channel

Analyze the Keltner channel’s slope
Avoid taking Positions when Keltner channel is flat

The fifth techniques takes into account the slope of the Keltner channel.

Keltner channel is a combination of an exponential moving average and the average true range indicator. Keltner channel uses the average true range to determine the channel distance. Keltner channel doesn’t predict new trends, just confirms the market trends once they have been developed.

Analyze the Keltner channel’s slope

An easy way to determine the main trend is to analyze the Keltner channel’s slope. The Keltner channel slope is simply the direction of the channel plotted on the chart.

An instrument is considered to be in an uptrend when the Keltner channel’s slope is upward. An instrument is considered to be in a downtrend when the Keltner channel’s slope is downward, like in this chart.

It’s also better for the price to stay above or below the channel, without touching it. When the Keltner channel’s slope is flat, this is a signal that the market is in range. In other words, no main trend is identified on the market.

Avoid taking Positions when Keltner channel is flat

You should avoid taking positions when thismarket condition is met. Keep in mind that trend analysis is only one part of the overall trading strategy you should employ to enter and exit trades.

It is never a good idea to enter a trade based on one factor alone, which is why you must look for as much evidence as possible to confirm a trade.

Final words

Okay, so that’s it I’ve come to the end of this presentation, I hope you’ve enjoyed it and if you really do please write a comment and click the share buttons smash it right, and click to subscribe bell to Allow notifications be updated.

Whenever, I publish content like, this and finally any questions or feedback let me know below and I’ll do my best to help, so with this guide, I hope you got value out of this presentation, I wish you good luck and good trading and I’ll talk to you soon you.

About Author

Milad Ghanbari

Milad Ghanbari is a trader and also loves writing. He created the MiladFX to help traders. And provides online tools and tutorials needed for traders for free here to support their colleagues in the field and guide them to do more successful trades. Turn on MiladFX notifications to benefit from new free future tutorials.

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