Swing Trading - How to Identify the Trend?

Proper trend identification is core to any style of trading. This is true for any market, no matter where you live in the world. As a result, nothing is more important than the trend if you are swing trading. NEVER trade against the trend. This simple piece of advice is neglected by many new traders, and they do so at their own expense. Trading against the trend can be the most expensive mistake you do regardless of the market you trade. Even before swing traders open a trade, they identify the trend before placing a trade and when they do they only ever trade with the trend and never against it. It makes sense then that before you continue with your trading career, you should do as much as possible to make sure you know how to correctly identify the trend in your market.

There are a wide variety of ways that swing traders check and confirm the trend. Over the years, there have been a wide variety of indicators and other tools that have been created which claim to identify trends in markets. What you usually discover is that these indicators or tools don't do a very good job or plainly are unable to identify trends. Luckily, there are a few simple indicators that have stood the test of time and to this day continue to be used by bank and other professional traders around the world. This very popular method used to identify the trend is to place a 150 or 200 day simple moving average indicator on your chart. Price above this indicator shows that the trend is up. Likewise, price below implies the trend is currently down. For many traders this sounds too simple and as a result they never truly take the time to test this method of trend identification. This is an extremely simple yet widely used method amongst corporate and bank traders. If corporate and bank traders continue to use this style of identifying trends, then anyone who is serious about trading should at least take the time to see if it suits their style of trading before neglecting it as being too simple.

If you'd like to identify the trend by other means, price action is another widely used and extremely popular way to identify the trend. When price is in an uptrend, price will make higher highs and lower lows. When price is moving down in a downtrend, price will make lower lows and lower highs. Again, this method also sounds extremely simple, but it is the most popular method used to identify the trend without the use of indicators.

This zigzag movement of price, in either an up trend or down trend, creates a series of peaks and troughs. It is at these peaks and troughs that swing traders enter trades in the same direction as the trend. Because this method of trend identification does not rely on the use of an indicator like a moving average, some traders may find it more difficult to use, but it is one of the oldest and trusted methods of correctly identifying a trend. Through enough screen time and practice, it will become second nature.