Trading Strategies using Technical Analysis

Trading Strategy: The Trend

In this lesson, you’ll learn how to implement trend analysis as the first pillar of a comprehensive trading strategy. Understanding how to identify and trade with the trend allows you to align with market momentum, manage risk more effectively, and simplify your decision-making process by following established market direction rather than attempting to predict reversals.

The lesson introduces key screening criteria for trend-based trading. You’ll discover how to identify rising trendlines and falling trendlines that have been tested three times or more, which defines them as significant trendlines. The strategy also incorporates moving average alignment, specifically looking for the 20 period aligned with the 50 and 200, along with moving average cross patterns combined with support and resistance levels.

Practical examples demonstrate four main screening approaches. The first screener identifies stocks touching a rising trendline in an uptrend for three times or more, shown through a Tesla example where the fourth and fifth touches signal potential long entries. The second screener finds stocks touching a falling trendline in a downtrend for three times or more, illustrated with Coinbase stock. The lesson emphasizes using confirmation tools like the RSI and support and resistance levels before entering trades.

The moving average alignment strategy is demonstrated with Microsoft, showing how to identify stocks where the 20 period simple moving average sits above the 50 and the 50 above the 200. The moving average cross example uses Salesforce, highlighting how price crossing the 200 period moving average combined with breaking an important resistance level can signal entry points, with the resistance area serving as a stop loss.

You can implement these strategies using the trading view screener found at the bottom of the platform, where you can add technical, descriptive and fundamental filters to customize your search and generate lists of stocks matching your criteria for further analysis.

Video Chapters

  1. 00:00 – Introduction to trend as first pillar of trading strategy
  2. 01:24 – Main screening criteria for trend analysis
  3. 02:15 – Touch of a rising trendline with Tesla example
  4. 03:16 – Moving average alignment strategy
  5. 04:10 – Moving average cross with Salesforce example

Key Takeaways

  1. A trendline becomes significant when it has been tested three times or more
  2. Always use confirmation indicators like RSI and support and resistance levels before entering trades
  3. The moving average alignment requires the 20 period above the 50 and the 50 above the 200 for uptrend confirmation
  4. Use the trading view screener to filter stocks matching your trend criteria with technical, descriptive and fundamental filters
Video Transcription

[00:00:00.05] - Speaker 1
The first pillar of our strategy is the trend. Being able to identify the trend of the asset we are trading allows us to better manage our risk and trade in the direction of the market. Trading with the trend has several key advantages. Trading with the trend means aligning with the market's current momentum. This approach often increases the chances of successful trades.

[00:00:22.14] - Speaker 1
Because you are moving with the market flow, not against it. Trend trading can help in managing risk more effectively. By following the trend, traders can set stop loss orders in alignment with the trend which can minimize potential losses if the market moves against their position. Trend trading streamlines the decision making process. Instead of predicting market reversals or trying to time the market, traders focus on identifying and following established trends which can be simpler and less stressful.

[00:00:54.26] - Speaker 1
Trends, especially in strong markets, can persist for a considerable period. This persistence allows traders to capitalize on large price movements leading to potentially significant gains. In this lesson we will show you many practical and real examples of how we use trend analysis. The trend becomes more significant as it is tested on many occasions. When the number of touches of the trendline is higher than 3, we can define a trendline as significant.

[00:01:24.15] - Speaker 1
Here we show you the main screening criterias we use to select companies using the trend. The first screener is stocks touching a rising trendline in an uptrend for three times or more. The second screener is stocks touching a falling trendline in a downtrend for three times or more. Then we have the alignment of moving averages to confirm the direction of the market. Here we want to see the 20 periods aligned with the 50 and the 200.

[00:01:51.22] - Speaker 1
And finally the moving average cross with support and resistance. All analysis are then followed by a study of the market structure and the use of signal confirmation indicators. Let's start with some practical examples to show you how we use trend analysis. The first example is the touch of a rising trend line. Here we want to look for an entry point and an uptrend.

[00:02:15.14] - Speaker 1
We are looking for at least more than three touches of the trend line. Here we can see how the Tesla stock is moving on an upward trend. The price retraces back to the trend line on multiple occasions. The fourth and fifth touch could signal potential entry for a long trade. But that is not all.

[00:02:33.05] - Speaker 1
We always want to confirm our trades using other indicators. One way to confirm is to use the rsi. Here we can see that the RSI provides a confirmation of our long trade. We also like to use support and resistance levels. As we can see here, the touch of the trendline comes at an important support level.

[00:02:52.02] - Speaker 1
Confirming the Long trade if we are looking for a short position, we monitor stocks that are approaching a falling trendline and we look for more than three touches. Here we see the coinbase stock in a long downtrend. The price retraces to the downtrend line on multiple occasions. In this example we also want to use other indicators as confirmation. We can draw our support and resistance levels.

[00:03:16.28] - Speaker 1
And we can see that at the third touch we are also near a previous resistance level. This market structure can be used as trade confirmation. Then we can move to an example of the moving average alignment. Here we want to look for stock in a perfect trend confirmed by the alignment of the 20 period. With the 50 and 200, we want to see the 20 period simple moving average above the 50 and the 50 above the 200 like in this example with Microsoft.

[00:03:46.11] - Speaker 1
We then want to look at potential entry points during the current trend. To screen for companies in this bucket, we can use the trading view screener that you can find at the bottom. Here we can add our filters and customize our search. Trading view allows us to add technical, descriptive and fundamental filters. Once added, we can then get our list of stocks matching our filter to perform further analysis.

[00:04:10.20] - Speaker 1
The last example is the moving average cross. Here we can either use a fast and slow simple moving average cross or the price crossing the moving average. Here we can see the crossover of the price with the 200 period moving average on the salesforce stock. We are looking in this case at a long entry. But we don't simply want to use moving averages.

[00:04:33.11] - Speaker 1
We want to confirm our trade. Using the market structure. We can see that the price breaks above the 200 period simple moving average as well as an important resistance level. The resistance area can also become our stop loss for our trade. In this case, the price retraces back and then continues the uptrend.

[00:04:52.25] - Speaker 1
This concludes the lesson on practical examples on the trend.