As trade of trends uses a trend component in movement of the prices, successful trading systems use a number of methods for identification of trends. The idea of use of the independent filter of trends is popular. It is algorithm which preliminary estimates dynamics of the prices and defines in it presence of a raising, lowering or lateral trend.

There are various approaches to working out of filters of a trend. Some methods, such as sliding averages, include indexes of presence of a trend in technology of inputs. Others (not recommended by me to use) try to predict forthcoming change of a trend and consequently giving an input signal still while the trend moves against this signal.

Many traders try to complicate a problem of identification of a trend. They investigate the various freakish mathematical equations and methods of the analysis of last movements of the prices for more exact definition of a present condition of a trend. I insist for that it is useless. As well as all things in trading, simplicity should be first of all.

Certainly, speaking about trend existence probably it only concerns a certain time window. But if you have already defined this time window, there is nothing difficult in definition in this time interval of presence of a trend. The prices or moving upwards during this time, or decrease downwards. You can look at the schedule and in most cases quickly to define it. What for complicating this process? It can be in case of a consolidation phase difficult precisely to define at a single glance what trend prevails. However there are no reasons for obligatory complication of process of definition of a trend.

At creation of the simple trend indicator there is one important question. What indicator of the price should be used for its designing? There are four choices – opening, closing, and the maximum and minimum prices. It is possible to use them separately and together. Whether it can help to define special research what of these indicators or their combination carries out function of indication of a trend is better? Or they are equivalent in the ability to identify a trend?

I have originally executed such research in the book which is called “The Dow Jones-Irwin Guide to Trading Systems 1989″
The research period made five years, coming to an end of June, 30th, 1987. Some time ago I have thought that it can be interesting to repeat this research with the new data.

The method consisted in creation of four simple indicators of a trend, each of which used various components of the price. For definition of their efficiency I have created for everyone simple trading system. When the indicator shows presence of an ascending trend system opens a long position and holds it until the system will not show presence of a descending trend. During this moment the system closes all long positions and opens the short.

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