Finding the Trend

Consistently finding the trend is possibly one of the most challenging things to do when trading.

One idea is to use a single 260-day moving average, or about a year in trading days. If trading long then the lows of the chart for at least a week prior are to be above the 260-day moving average.

However, only trade long when you have this together with your chosen market as a whole moving long; this is important, and the opposite is true if trading short. The figure below shows the current FTSE 350 in MACD histogram weighted by the cap. This market is tentatively moving long, i.e. walking into a tentative buy regime. I say tentative because of the shape and depth of the histogram.

Screenshot 2014-10-21 09.14.55

Together with the histogram, if trading long, the stochastic, or similar indicator, must show an oversold:

Screenshot 2014-10-21 09.15.16

Here are a few shares that currently meet the 260-day moving average criteria:

Screenshot 2014-10-21 09.16.29

Screenshot 2014-10-21 09.16.39

The individual stock must also meet the MACD and Stochastic requirements. As an added assurance, the calculated Margin of Safety is to be acceptable, depending on whether you are long or short.

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