The market trends only about 25-30% of the time so when it does start to trend a trader needs a way to identify the trend. By being able to identify the trend a trader can always be on the right side of the trend and increase the chances of successful trades
We like to use moving averages and oscillators to find trends. There are many systems used to find moving averages along with many indicators. We like to use only a few and not over complicate the process.
Moving Averages:
Moving averages are probably one of the most common and easy-to-use indicators to find the trend. One, two, or three averages can be used. Simple (SMA) and Exponential (ENA) moving averages are commonly used they both tell you the same thing, what the market has been doing. Simply stated if the averages are going up the market has risen and if they are going down the market has fallen. Moving averages are lagging indicators and like any other indicator they do not come with a crystal ball to predict what the market will do.
A trader may miss the beginning of a move because the market will have already made its move when the indicators give their signal. The moving averages indicate the direction of the trend and give you a greater advantage on knowing which way the market is moving. This in turn gives a trader better trades because prices usually tend to stay in the direction of the major trend. If the market stays above or below the moving average it is considered a trend and should be considered to be intact.
If the prices keep going up the MA will continue to go up when the price starts to stall then the MA will start to go sideways and when the price falls the MA will start to point down. The MA tells us what the sentiment of the market is. The larger the time frames the better the indication of the major trend.