How To Tell When The Market Is Trending

There’s a famous Wall Street saying that goes like this…

Question: What is the trend of the market?

Answer: What is your time frame?

You’re wondering: What does it mean?

This means there are trends on different time frames. You can have a downtrend on 5 minutes chart and an uptrend on a daily chart.

Here’s an example…

So, you’ve understood that trends can exist in different time frames.

Now… let’s learn how to define a trend objectively.

There are two ways you can go about it:

Structure of the markets
Moving average
Structure of the markets

The market is in an uptrend when there’s series of higher highs and higher lows.

Likewise, in a downtrend, there’s a series of lower highs and lower lows.

Moving average

Alternatively, you can use a moving average to define the trend.

Here’s how you can do it:

20 ma – Short term trend
100 ma – Medium-term trend
200 ma – Long term trend
If 20 ma is pointing higher, and the price is above it, then the short term trend is up.

If 100 ma is pointing higher, and the price is above it, then the medium-term trend is up.

If 200 ma is pointing higher, and the price is above it, then the long-term trend is up.

Let’s look at a few examples:

If you want to learn more, go watch the training video below: