Online trading using trends is a strategy that aims at capturing gains by analyzing a security’s momentum flowing in a certain direction. If, say, a security is trending upwards, traders who use trends enter a long position and the opposite also applies when a security is trending lower where they enter a short position.
When using trends in online trading, there is the assumption that a security will consistently move following a particular trend and there is always a stop loss or take profit provision when signs of reversal are seen. As a trader using trends, you will remain in the same position until the trend reverses. Reversals can happen at varying times.
Here are the top 3 trends in online trading in 2018:
- Using Moving Averages
Moving averages create a single flowing line so as to create a smooth price data. This line is a representation of the average price for a set time period. The moving average you decide to use as a trader is dependent on the timeframe for which you trade. Some of the most common moving average trends being used by traders in 2018 are the 50-day, 100-day, and 200-day simple moving average trends.
Moving average can be used in several ways. Further, you can look at the moving average angle. If it is constantly moving in a horizontal direction for a long period of time, the price is ranging rather than trending. When the moving average line takes an upward angle, then an uptrend will result.
Moving averages can be utilized through crossovers. If you have a 50-day and 200-day moving average set on your chart, a sell signal will come up when a 50-day falls below the 200-day while a buy signal comes up when a 50-day crosses over the 200-day.
2.Moving Average Convergence Divergence (MACD)
MACD is an oscillating indicator that fluctuates below and above zero. It is a trend-following indicator. Traders in 2018 are using the MACD to yield their profits online. They are looking at which position of the zero the MACD is on. If it is above the zero for a long time period, the trend is going up and if it is below zero for a long time period, the trend is going down.
A buy signal is predicted when the MACD goes above the zero while a sell signal comes up when it goes below zero.
- On-Balance Volume (OBV)
Volume is a great indicator. OBV brings together volume information and then compiles it to a one-line indicator. This indicator then measures the cumulative selling/buying pressure by subtracting the volume on down days and adding the volume on up days. Volume confirms trends.
A rise in price is followed by a rise in OBV while a drop in price is followed by a drop in OBV. If OBV rises and the price doesn’t rise, there is a high likelihood that the price will follow OBV and also rise. If the price is rising and the OBV is falling or flat-lining, the price could be nearing the top. If there is a fall in price and OBV is rising or flat-lining, the price may be near a bottom.
These are the three top trends traders are using in 2018 in online trading. You can make online trading easier and more profitable for yourself if you employ automated trading.