Classifying Trend Direction and Strength with a Moving Average
Summary
The indicator uses a five-period simple moving average to classify the current trend as upward, downward, or weak. It compares the current average with its previous value: a ratio above one signals an uptrend, while a ratio below one signals a downtrend. The display uses green, red, and yellow bars for these respective states.
A weak or flat trend is identified when the ratio is close enough to one, according to a user-set tolerance. The document describes a straightforward way to turn moving-average direction and magnitude into a visual trend filter, and says users can adjust the tolerance, average type, and lookback period. It provides no performance tests, trading rules, or evidence that the classifications predict future prices. Results therefore depend on the chosen settings and the underlying price data; the indicator alone does not specify entries, exits, or risk controls.
Key ideas
- The indicator compares a moving average with its prior value to classify trend direction.
- A ratio above one indicates an upward trend, while a ratio below one indicates a downward trend.
- A configurable tolerance defines when the movement is weak enough to count as flat.
- Users can change the moving-average type, period, and tolerance.
- The document gives no performance evidence or complete trading rules.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.