Trend and shock are two words that appear frequently in the investment market, and they are often mentioned together in the securities market. Whether in the stock market, option market or futures market, following the trend or tracking strategy based on the trend are highly respected trading strategies. So, how can we tell if it is a trend?

1 Differentiate by market efficiency coefficient.

According to the suggestion in "Smart Trader", the market efficiency coefficient is used to quantitatively describe shocks and trends, so as to distinguish trends from shocks.

Among them, the cumulative value of the absolute value of daily closing price changes in a period of time is compared to distance, and the ups and downs in a period of time are compared to displacement. The price fluctuates up and down, the total distance is long, the final displacement is not large, the efficiency is low, and it is in a volatile market; The change of daily closing price contributes a lot to the final price rise and fall, which is an efficient trend market.

2 Use adaptive moving average (AMA) to distinguish

The slow parameter is used for sideways oscillation and the fast parameter is used for trend.

3 moving average differentiation

The short-term moving average of volatile market frequently turns, and the trend is opposite.

Finally, it should be noted that in order to formulate a good trend tracking strategy, it is best to set a reasonable threshold artificially based on the characteristics of different trading varieties.