Three Trend Identifying System – Dual Moving Average
Entering the first step of technical analysis! We must first have a tool that allows us to identify the direction of market trends. Many traders will feel that the market always goes against them. Market goes up as soon as traders sell, and goes down as soon as trades buy. In fact, it’s not the market, but the problem is that many traders don’t have a good trend identification system to understand the information that markets are whispering to you.
In technical analysis, there are different theories that define trends. You may also have heard that an upward trend is where market trades higher high and higher low, and the downward trend when a lower high and lower low is found. Or even more complicated where traders uses Elliot wave theory to calculate the current trend wave. Here we will use the most classic moving average system to analyze trends. The advantage of moving average is that it is presented directly using price information, so there will be lesser ambiguity as Elliot wave trend definition. But if you use a single moving average to identify trend, there will be another problem. That is, a single moving average will have many false signals.
For example, it is hard to know whether a price is supported at moving average or not. Because of the ambiguity, it is actually unreasonable to use single average line to verify support resistance. Whether it is the Cloud indicator trending system, the Vegas dual tunnel or Dual moving average system. Because the region is matched and in line with the ambiguity of the market, a double moving average is necessary.
Here we will focus on the above three trend systems, so that you can directly learn how to identify trends.
Let’s start with the basics!
System One – Dual Moving Average Trend System
The usage of the double moving average system is very literal, using two moving averages to determine the trend. Use Golden cross and Death cross to implies a change in trend. Golden cross is when fast moving average moves upward and crosses the slow moving average (the blue line crosses above the red line). This indicates that the price is moving in an upward trend. Conversely, a death cross is when the fast moving average falls and crosses below the slow moving average (the blue line crosses and falls below the red line). This can be defined as a downtrend.