Determining the Market's Major Trend

An old trading saying goes, a rising tide raises all ships. It has been estimated that 60 to 70 percent of a stock's movement is not from fundamental changes in the stock outlook but with the stock's following the general market. As the general market rises or falls most stocks will rise and fall to a similar extent.

An easy method of determining the general trend is described in Trader Vic II - Principles of Professional Speculation by Victor Sperandeo.

Using the 200 - Day Moving Average

1. If the 200-day moving average line flattens out following a previous decline or is advancing, and the prices break out through the moving average on the upside, then these events constitute a long-term signal.

2. If the 200-day moving average flattens out following a previous rise or is declining, and prices penetrate the moving average on the downside, these events constitute a major long-term sell signal.
   
   Source: Trader Vic II - Principles of Professional Speculation

Your results will improve if you trade with the major trend.