One of the most interesting ways of determining where you stand in a trend (and even whether you are in a trend) is to look at the long-term moving average and the volatility that is occurring around it. Most well-known on this topic is the indicator called the Bollinger Bands.
What I am doing in this video is presenting some ways in which you can start using and modifying this tool. From the work done by a number of authors on the topic I discuss the idea of trending trades and mean reversion trades and help you decide which is appropriate. I look at a number of examples but as I say in the video put these indicators on your own charts and see how you might integrate them in with your current methods.
My concern for many traders is that they look at the price outside of the Bollinger Bands and assume that price will shortly revert back to the mean. What you will find is that in a trending market this is not likely to be the case – until the trend breaks down.
If you want to get into the real nitty-gritty of this issue then there are a couple of really good reads:
We will be doing a number of videos on volatility in the coming weeks. If you have questions for us just drop it in the comment section.