There are countless tools used in technical analysis. One of the simplest and most helpful is the moving average. In my charts, I tend to watch the simple moving average over 10, 20, 50, 100 and 200 periods. I draw them as follows:
Note: the usage of “red-white-blue” makes it easier to quickly identify the more commonly involved lines on a crowded chart. Also, I often show the USDJPY in purple on charts. Not to be confused with the SMA50, it is rarely as smooth and curvy.
We can get a quick read on the big picture by looking at the daily moving averages. If they’re all pointed in the same direction and are somewhat parallel to one another, that’s a strong trend. On the other hand, if the 10-day is crossing the 20 (as above) or 50, then we’re setting up for a potential trend change.
I say “potential” because we also often see reversals at crossing points, particularly when TPTB are heavily involved in following a particular script. This makes crossing points good potential targets, especially when they intersect with important Fibonacci levels.