67.90 % of retail investors lose their capital when trading CFDs with this provider.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67.90 % of retail investors lose their capital when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

The importance of trading in the trend using the appropriate tools

Published: 30.10.2023

Trading in the direction of the trend is a proven method of making potentially decent profits in trading. However, identifying the trend can often be a tricky task. So today we'll look at which tools can help us identify a trend on a price chart.

You must have heard the phrase "trend is your friend". But what does it actually mean? In the context of the financial market, a trend is a certain tendency in the long-term direction of prices. If a trader can correctly identify the trend and trade in line with it, he has a better chance of success.


Downtrend, Red line indicates a profitable trade in the direction of the trend [AUDUSD H4]
Downtrend: Red line indicates a profitable trade in the direction of the trend [AUDUSD H4]


Why is the trend so important? When you trade in line with the trend, you are swimming with the current and not against it. This increases the likelihood that your trade will be successful. Trading against the trend can be risky because you are facing the majority of the market. The psychology of trading tells us that trading is primarily about probability, so by following the trend, it is possible to potentially profit due to the increased likelihood of keeping up with the market.

Trend indicators - an invaluable tool for the trend trader

Trend indicators allow us to visualize and recognize the trend in the market. They allow us to recognize when the market is in an uptrend and when it is in a downtrend. They are essential tools that can help traders in their decision making.

However, as is the case with other types of indicators, we can find flaws also in trend indicators. Some can be lagging, meaning they do not show the current market situation, while others can be repainted and change their values throughout the day. This shortcoming can cause unnecessary losses for traders.

Purple Strike Indicator - A new generation of trend indicators

Fortunately, there is a tool that can help you in this area: Purple Strike Indicator. This indicator was designed to eliminate the shortcomings of conventional trend indicators. Not only does it identify the trend, but it also provides reliable signals for trading without delay, all without redrawing on closed candles.

Uptrend, Purple Strike indicator shows blue uptrend trend, Red line indicates profitable trade in trend direction [USDCAD, H4]
Uptrend, Purple Strike indicator shows blue uptrend trend, Red line indicates profitable trade in trend direction [USDCAD, H4]
 

Combined with precise algorithms and technologies, the Purple Strike indicator can perfectly identify where the market has the potential to reverse or continue the current trend. What's even better? The Purple Strike Indicator provides you with clear indicators of appropriate points to buy or sell, optimizing your decision-making within the current trend.

 

How the Purple Strike Indicator works - watch the video

Want to try the Purple Strike Indicator for yourself? Try it for free on our demo account.

Main advantages of Purple Strike Indicator

One of the unique features of the Purple Strike Indicator is its ability to identify a trend right from its beginning and not be affected by a correction. This means that it can "ride" the trend until its very end. Another advantage is that it is tested on closed candles. This means that once the candle is closed, you can count on the indicator staying there plotted as it was and not changing back.
 

How to work with Purple Strike Indicator?

After moving the indicator to the chart in the MetaTrader 4 platform, you can see that you can modify some parameters. By default, you can change the colors and the period. The period indicates from how many candles in retrospect the indicator is calculated. That is, from how many candles it takes a value, which it then composes into whether it plots an up or down trend.

Another interesting feature is the ability to set up notifications either by email or mobile. This is particularly useful for swing traders.

The indicator is plotted as two colors. The blue color indicates an uptrend (upward direction) and the red color indicates a downtrend (downward direction).

How does the Purple Strike Indicator work in practice?

If you take a look at the sample image below, you will see that trends are indeed emerging. However, keep in mind that this is a trend indicator. These are especially suitable for trending markets such as stocks, stock indices, commodities and forex markets on higher timeframes.
 

Purple Strike Indicator display [S&P500, H4]
Purple Strike Indicator display [S&P500, H4]


However, in a sideways move (when the market is not trending) trend indicators generally do not work well. This can be addressed by using another indicator to identify trend movement, such as the Purple Extreme oscillator, or you can use another trend indicator with a different period. In this case, you can rely on only entering the trend when it is truly confirmed.

 

So don't hesitate to test the Purple Strike Indicator on different time frames and instruments to improve your trading strategy. This tool could be the one that takes you to the next level in your trading.

Want to try the Purple Strike Indicator for yourself? Try it for free on our demo account.

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67.90 % of retail investors lose their capital when trading CFDs with this provider.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67.90 % of retail investors lose their capital when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.