How to detect trends early
There are many ways to detect trends and some can lead to lot of false moves and whipsaw while some are better at detecting trends.
Besides trend detection as a trader you are also interested in identifying explosive trend and not just a slow moving trend. Explosive trends is where big opportunity to make money in short amount of time is.
Let us look at SSRI a silver stock that has recently established a trend.
The stock showed up on scan this week. The longer term trend detector sacrifices part of the move to avoid whipsaw. But once a trend is detected it tends to be explosive trend.
Guppy Multiple Moving Averages are 12 exponential averages used to detect trends. The 12 averages are 3, 5, 8, 10, 12, 18, 30, 35, 40, 45, 50, and 60. The 3, 5, 8, 10, 12, and 18 period exponentially moving averages are used to show the short-term trend and the 30, 35, 40, 45, 50, and 60 show the longer-term trend.
There are many ways to determine trend start and trend end. If you use a very sensitive indicator to detect trend you will find trends early , but you will also find many false starts.
In above example TI65 and Guppy MMA detected a trend start early , but they also gave false signal in August.
There is no one best way to find trends , but whichever way you select you need to be consistent about it and think a lot about it.
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Source: http://stockbee.blogspot.com/2014/02/how-to-detect-trends-early.html
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