Should I Buy (or Sell) That Stock? These 7 Trend Indicators Will Help You Decide

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It’s hard to know what to buy or sell let alone when to do so. Thank goodness there are indicators available that can help you with that decision. The trend is your friend and this article reviews the 7 most popular trend indicators to help you make an extensive and in-depth assessment of whether you should be buying or selling.

There are over 80 market indicators divided into 6 categories (trend, momentum, volatility, market strength, support/resistance and cycle). That being said some are very technical, some are infrequently used and some are more effective than others. The most popular indicators, and also available for use free at online charting service such as stockcharts.com and/or bigcharts.com, are those regarding:

  • market trends
  • market momentum (see here for a description of use of these indicators) and
  • market strength and volatility (see here)

Below are descriptions of the 7 most popular trend indicators: Crossovers; Moving Average Convergence Divergence; Percentage Price Oscillator; Keltner Channels; Parabolic SAR; Traders’ Index; and Advance/Decline Line.

Trend Indicators
The price movement of a security over time is most easily analyzed by observing how its moving averages are trending. Either a simple moving average (where the movement during a specific time period is divided by the days of that time period) or an exponential moving average (where a mathematical formula gives greater emphasis to the more recent price movement) can be used and any period of time (up to 360 days on the various fine charting sites) can be studied.

The most common short-term time period is 20- or 21-days using an exponential moving average (ema), while the most popular medium-term periods are the 39- or 40- and 50-day using a simple moving average (ma).

To observe the long-term trend of the price movement of a security a 200-day ma is usually used and occasionally a 100-day ma. That being said, a large number of variations have been developed to satisfy particular needs and situations.

7 of the most popular trend indicators are as follows:

1. Crossovers
– used to forecast the future movements in the price of a stock such as when a stock or index moves above (bullish) or below (bearish) its 20-day moving average.

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