BUILT-IN COLOR TREND INDICATOR

Acting on the trend means we should be a buyer when the trend is up and a seller when the trend is down. Most of us, when we are trading, hope to identify the trend early and benefit to the full extent of the trend by employing various mathematical tools. There have been many trend systems developed but one of the easiest market tools to identify trend is moving averages. In a strong trending market, moving averages work very well. It is during the non-trending market that moving average systems falter. Figure 7.1 shows two weekly charts of the same stock. The left panel shows the common candlestick chart, and the right panel shows the candlesticks with a built-in color (BIC) trend indicator.

FIGURE 7.1 The left panel is the normal weekly candlestick chart, in which the candlestick is blue when the day close is higher than the opening price. The right panel also shows the weekly candlestick chart of the same stock, except it incorporates a built-in color trend indicator.

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In Figure 7.1, price movement that is deemed to be bullish is shown by a blue candle, bearish movement by a red candle, and neutral candles are colored in black and dark red. When the candlestick is neutral, the indicator is undecided as to the continuity of the bull or bear trend as there is a probability of a change in trend.

When the stock, as in Figure 7.1, uses the BIC trend ...

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