Table of Contents
1
Understanding Market Trends
Trading with the trend is one of the most fundamental principles in technical analysis. Trend filter strategies help you identify the dominant market direction and filter out low-probability trades that go against the prevailing momentum.
Core Trend Filter Principles
Trend Identification
- •Higher highs and higher lows (uptrend)
- •Lower highs and lower lows (downtrend)
- •Sideways movement (consolidation)
- •Multiple timeframe confirmation
- •Volume confirmation
Filter Application
- •Only trade in trend direction
- •Wait for pullbacks in uptrends
- •Look for bounces in downtrends
- •Avoid ranging markets
- •Use multiple confirmations
2
Technical Trend Filters
Technical indicators provide objective ways to identify and confirm market trends. Here are the most effective trend filters used by professional traders.
Moving Average Filters
Simple Moving Averages
- • 50 SMA: Medium-term trend
- • 200 SMA: Long-term trend
- • Price above/below SMA
- • SMA slope direction
Exponential Moving Averages
- • 9/21 EMA crossover
- • 20/50 EMA alignment
- • EMA slope analysis
- • Multiple timeframe EMAs
Momentum Indicators
ADX (Average Directional Index)
- • ADX > 25: Strong trend
- • ADX < 20: Weak trend
- • +DI > -DI: Uptrend
- • -DI > +DI: Downtrend
MACD
- • MACD line above signal
- • MACD histogram positive
- • Zero line crossovers
- • Divergence signals
Master Trend Filter Trading
Remember: The trend is your friend until it ends. Use these filter strategies to trade with the market momentum and avoid fighting against the prevailing direction.