The road to successful trading requires the trader to continually review, assess and improve their trading system, and most importantly, their individual self. My experience tells me that a successful trading system cannot be strictly static but needs to include continuous improvement. For instance, if your system is giving signals that have proven to be a little premature, then study how an adjustment may improve the accuracy and success of the system. As you may know, I rely on the market trend to guide my direction and timing with the markets. I look at the short-term, intermediate and long-term trends that it gives.
For years I have relied on utilizing the 8-period and the 21-period exponential moving averages to guide my trading decisions. I would analyze these at the monthly, weekly and daily levels. One problem with this approach is that my trading timeframe does not equal the criteria I set. Because I swing trade and hold a stocks between a few hours and a few weeks. Therefore, I have decided to shift my short, intermediate and long-term views in a bit and will not include the monthly trend. A strong weekly trend is sufficient for my trading system and style.
Below is the criteria I now use to determine a trend. Trend criteria does not need to be difficult or complex. You may simply rely on the 50-period and 20-period moving averages and that is fine. It really depends on your trading strategy.
What is the purpose of all this? First, consistency is the most important key to successful trading and I need to ensure my performance is consistent. I need to have a well-defined, clear understanding of what the overall markets are doing. Also, this criteria is also applied in my individual stock entry and exit strategies.
I hope you this will help you in your trading. If you have any questions, please let me know.