Let's learn how to interpret the Trend Strength Matrix.
Where is price in relation to its moving averages on a chart?
Is price above or below its 50 SMA?
Is price above or below its 200 SMA?
The x-axis (blue line) measures how far above (or below) price is relative to its 200 SMA.
A positive number indicates a bullish trend. The larger the positive number, the stronger the bullish trend is because this means that price is waayyy above the 200 SMA.
In contrast, a negative number indicates a bearish trend. The larger the negative number, the stronger the bearish trend is because this means that price is waayyy below the 200 SMA.
The y-axis (purple line) measure far above (or below) price is relative to its 50 SMA.
The principle is the same with 50 SMA as with the 200 SMA mentioned earlier.
A positive number indicates a bullish trend. The larger the positive number, the stronger the bullish trend is because this means that price is waayyy above the 50 SMA.
In contrast, a negative number indicates a bearish trend. The larger the negative number, the stronger the bearish trend is because this means that price is waayyy below the 50 SMA.
Where is price in relation to its moving averages on a chart?
Is price above or below its 50 SMA?
Is price above or below its 200 SMA?
The x-axis (blue line) measures how far above (or below) price is relative to its 200 SMA.
A positive number indicates a bullish trend. The larger the positive number, the stronger the bullish trend is because this means that price is waayyy above the 200 SMA.
In contrast, a negative number indicates a bearish trend. The larger the negative number, the stronger the bearish trend is because this means that price is waayyy below the 200 SMA.
The y-axis (purple line) measure far above (or below) price is relative to its 50 SMA.
The principle is the same with 50 SMA as with the 200 SMA mentioned earlier.
A positive number indicates a bullish trend. The larger the positive number, the stronger the bullish trend is because this means that price is waayyy above the 50 SMA.
In contrast, a negative number indicates a bearish trend. The larger the negative number, the stronger the bearish trend is because this means that price is waayyy below the 50 SMA.
Let's take a look at a price chart of NZD/USD with the 50 SMA (in purple) and 200 SMA (in red) overlayed on the chart.
Notice where the current price is compared to the 50 SMA (in purple).
The price is below the 50 SMA. This is a bearish sign.
Now, look at the distance between the price and the 50 SMA. They are pretty far apart. The further apart they are, the more bearish the trend is.
Notice where the current price is compared to the 200 SMA (in red).
The price is also below the 200 SMA. The 200 SMA is "longer" than the 50 SMA because it incorporates more historical data.
Longer-term moving averages are considered more reliable trend indicators and less susceptible to temporary fluctuations in price.
The 200-day moving average is considered especially significant.
Now, look at the distance between the price and the 200 SMA. The distance apart is pretty huge! This is a very bearish sign.
Notice where the current price is compared to the 50 SMA (in purple).
The price is below the 50 SMA. This is a bearish sign.
Now, look at the distance between the price and the 50 SMA. They are pretty far apart. The further apart they are, the more bearish the trend is.
Notice where the current price is compared to the 200 SMA (in red).
The price is also below the 200 SMA. The 200 SMA is "longer" than the 50 SMA because it incorporates more historical data.
Longer-term moving averages are considered more reliable trend indicators and less susceptible to temporary fluctuations in price.
The 200-day moving average is considered especially significant.
Now, look at the distance between the price and the 200 SMA. The distance apart is pretty huge! This is a very bearish sign.
Let's take a look at a price chart of AUD/USD with the 50 SMA (in purple) and 200 SMA (in red) overlayed on the chart.
Let's take a look at a price chart of GBP/USD with the 50 SMA (in purple) and 200 SMA (in red) overlayed on the chart.