Trend Indicators
Trend indicators tell you the direction of the market. They help answer the fundamental question: "Is this stock going up or down?"
Moving Averages (EMA)
What it is: The average price over a period, with recent prices weighted more heavily (Exponential Moving Average).
Key EMAs
| EMA | Timeframe | Used By |
|---|---|---|
| EMA 9 | Very short-term | Day traders |
| EMA 21 | Short-term | Swing traders |
| EMA 50 | Medium-term | Position traders |
| EMA 200 | Long-term | Investors |
Signals
Golden Cross / Death Cross
GOLDEN CROSS: EMA 50 crosses ABOVE EMA 200
→ Strong bullish signal, major trend reversal up
→ Score: +2 bullish
DEATH CROSS: EMA 50 crosses BELOW EMA 200
→ Strong bearish signal, major trend reversal down
→ Score: +2 bearish
Price Position
Price > EMA 50 > EMA 200: Strong uptrend (+1 bullish)
Price < EMA 50 < EMA 200: Strong downtrend (+1 bearish)
Best for: Confirming overall trend direction
KST (Know Sure Thing)
What it is: A momentum oscillator that combines four different rate-of-change calculations, smoothed and weighted.
Why it's powerful: Filters out short-term noise to identify major trend changes.
Signals
KST BULLISH CROSSOVER: KST crosses ABOVE signal line
→ Major trend reversal to upside
→ Score: +2.5 bullish (high weight)
KST BEARISH CROSSOVER: KST crosses BELOW signal line
→ Major trend reversal to downside
→ Score: +2.5 bearish (high weight)
KST > 0: Overall bullish momentum (+1 bullish)
KST < 0: Overall bearish momentum (+1 bearish)
Best for: Identifying major trend reversals (less frequent but more reliable)
ADX (Average Directional Index)
What it is: Measures trend strength (not direction) on a 0-100 scale.
Interpretation
| ADX Value | Meaning | Strategy |
|---|---|---|
| < 20 | Weak trend | Use range-bound strategies |
| 20-25 | Trend emerging | Watch for breakout |
| 25-50 | Strong trend | Trend-following works well |
| > 50 | Very strong trend | Watch for exhaustion |
ADX < 20: Avoid trend-following strategies
ADX > 25: Trend-following strategies work well
ADX > 50: Trend may be exhausting, watch for reversal
Best for: Deciding whether to use trend-following or range-bound strategies
Supertrend
What it is: A trend-following indicator that uses ATR (Average True Range) to calculate dynamic support/resistance levels.
Parameters
- Period: 10 (default)
- Multiplier: 3 (default)
Signals
BULLISH FLIP: Price crosses ABOVE Supertrend line
→ Buy signal with built-in stop-loss
→ Score: +2.5 bullish
BEARISH FLIP: Price crosses BELOW Supertrend line
→ Sell signal, exit long positions
→ Score: +2.5 bearish
UPTREND: Price above Supertrend (+1 bullish)
DOWNTREND: Price below Supertrend (+1 bearish)
Key Advantage
The Supertrend line itself serves as your stop-loss level. When price crosses below it in an uptrend, you exit.
Entry: Buy when Supertrend flips bullish
Stop-Loss: The Supertrend value
Trail: As Supertrend rises, move stop-loss up
Best for: Trend following with clear entry/exit signals and built-in risk management
Ichimoku Cloud (Ichimoku Kinko Hyo)
What it is: A comprehensive indicator showing trend, momentum, and support/resistance all in one view.
Components
| Component | Calculation | Purpose |
|---|---|---|
| Tenkan-sen | (9-period high + low) / 2 | Conversion line |
| Kijun-sen | (26-period high + low) / 2 | Base line |
| Senkou Span A | (Tenkan + Kijun) / 2 | Leading span A |
| Senkou Span B | (52-period high + low) / 2 | Leading span B |
| Cloud (Kumo) | Area between Span A & B | Support/Resistance |
Signals
STRONG BUY: TK bullish cross + Price above cloud
→ All signals aligned bullish
→ Score: +2.5 bullish
STRONG SELL: TK bearish cross + Price below cloud
→ All signals aligned bearish
→ Score: +2.5 bearish
PRICE ABOVE CLOUD: Bullish trend (+1.5 bullish)
→ Cloud acts as support
PRICE BELOW CLOUD: Bearish trend (+1.5 bearish)
→ Cloud acts as resistance
PRICE IN CLOUD: Consolidation/neutral
→ Wait for breakout
Reading the Cloud
- Thick cloud = Strong support/resistance
- Thin cloud = Weak support/resistance
- Green cloud (Span A > Span B) = Bullish bias
- Red cloud (Span B > Span A) = Bearish bias
Best for: Comprehensive trend analysis with built-in support/resistance levels
Aroon Indicator
What it is: Measures time since the highest high and lowest low to identify trend changes.
Components
Aroon Up = ((Period - Days since highest high) / Period) × 100
Aroon Down = ((Period - Days since lowest low) / Period) × 100
Signals
BULLISH CROSSOVER: Aroon Up crosses ABOVE Aroon Down
→ New uptrend starting
→ Score: +2 bullish
BEARISH CROSSOVER: Aroon Down crosses ABOVE Aroon Up
→ New downtrend starting
→ Score: +2 bearish
STRONG UPTREND: Aroon Up > 70, Aroon Down < 30
→ Score: +1.5 bullish
STRONG DOWNTREND: Aroon Down > 70, Aroon Up < 30
→ Score: +1.5 bearish
Interpretation
| Aroon Up | Aroon Down | Meaning |
|---|---|---|
| > 70 | < 30 | Strong uptrend |
| < 30 | > 70 | Strong downtrend |
| Both > 70 | Both > 70 | Consolidation |
| Both < 30 | Both < 30 | No clear trend |
Best for: Early detection of new trends and trend strength assessment
Summary Table
| Indicator | Signal Type | Bullish Score | Bearish Score |
|---|---|---|---|
| Golden Cross | Crossover | +2 | - |
| Death Cross | Crossover | - | +2 |
| Price above EMAs | Position | +1 | - |
| Price below EMAs | Position | - | +1 |
| KST Bullish Cross | Crossover | +2.5 | - |
| KST Bearish Cross | Crossover | - | +2.5 |
| Supertrend Bullish | Flip | +2.5 | - |
| Supertrend Bearish | Flip | - | +2.5 |
| Ichimoku Strong Buy | Combined | +2.5 | - |
| Ichimoku Strong Sell | Combined | - | +2.5 |
| Aroon Bullish Cross | Crossover | +2 | - |
| Aroon Bearish Cross | Crossover | - | +2 |
Next: Momentum Indicators →