There are many ways to define the trend of an instrument,  following are the methods I use to determine the trend and ultimately the direction I am looking to place my trades.
The first tool I use is straight from Stan Weinstein’s Secrets For Profiting in Bull and Bear Markets. It is a 30 period simple moving average. When it is rising, the trend is up. When it is falling, the trend is down. When it is flat, the trend is neither up or down.
The second tool I use is to observe the price chart and take note of where the highs and lows are formed on the chart. If price is forming Higher highs and higher lows, it is trending up.

A downtrend is the exact opposite of an uptrend. Price will be forming lower lows and lower highs. I prefer both these tools to be in unison prior to placing a trade. For example, for a long position, I want the moving average to be rising and price to be forming higher lows and higher highs.
The only question we still have to ask now, is how do we know when the trend has changed. This is a relatively simple process as well. Imagine price is currently forming higher lows and higher highs. What we would look for is price to form a lower high and then a lower low. Generally by the time this has happened, the 30 period simple moving average will be moving down also. The following chart shows this clearly.

These are very basic strategies for determining the trend but also extremely effective. Note that the above chart is a weekly chart of the Dow Jones Industrial Average and also note that the trend changed about January 2008. Imagine if the so called experts or the general public utilized these methods to trade the stock market. I am confident that anyone using these methods during the 2008/09 financial crisis would have experienced positive outcomes. If you haven’t read Stan’s book I highly recommend it.

Perry

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