Trend Spotting 1

When two people go to war, the foolish man always rushes blindly into battle without a plan, much like a starving man at his favorite buffet spot. The wise man, on the other hand, will always get a situation report first to know the surrounding conditions that could affect how the battle plays out. Like in warfare, we must also get a situation report on the market we are trading. This means we need to know what kind of market environment we are actually in. Sometimes the system does in fact, suck. Other times, the system is potentially profitable, but it is being utilized in the wrong environment. Before spotting those opportunities, you have to be able to determine the market environment. The state of the market can be classified into three scenarios: 1.Trending up, 2. Trending down, 3. Ranging. A trending market is one in which price is generally moving in one direction. Sure, price may go against the trend every now and then, but looking at the longer time frames would show that those were just retracements. Trends are usually noted by "higher highs" and "higher lows" in an uptrend and "lower highs" and "lower lows" in a downtrend. Place a 7 period, a 20 period, and a 65 period Simple Moving Average on your chart. Then, wait until the three SMA's compress together and begin to fan out. If the 7 period SMA fans out on top of the 20 period SMA, and the 20 SMA on top of the 65 SMA, then price is trending up. On the other hand, if the 7 period SMA fans out below the 20 period SMA, and the 20 SMA is below the 65 SMA, then price is trending down. - See more at: http://stocks-basics.blogspot.com/2016/11/trend-spotting-1.html#sthash.yRBGPowT.dpuf