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Here's a simple indicator of trend strength. It goes like this: A value of +10 signals an uptrend; a value of -10 signals a downtrend. STOCKS & COMMODITIES Contributing Editor Tushar Chande uses this simple rating system to help answer the eternal traders' question: Is the market trending?

As you may have noticed, a number of rather complicated indicators are available to measure trend strength. None of these indicators, unfortunately, is perfect. You could use J. Welles Wilder's average directional index (ADX) as an indicator of trend strength, or perhaps the r? value from linear regression analysis. Or you could even use the vertical horizontal filter (VHF) to help determine whether the market is trending.

Each of these indicators requires the user to determine how many days' data should be used in the calculations. As you vary the indicator length or number of days used in the calculation, however, the result of the calculation changes also. Thus, there is no unambiguous answer. If the market were about to enter or leave a trading range, you could get a different indication of trend strength every day — a frustrating set of circumstances.

RATING THE TREND

Here is my way of rating a trend, a method I call trendscore. If today's close is greater than or equal to the close x days ago, score one point. If today's close is less than the close x days ago, the trend's rating loses one point.

Next, compare today's close to the close x+1 days ago. If today's close is greater than or equal to that close, score another point. Deduct one point if the close is lower than the prior close.

If (today's close >= close x days ago) then score = 1
If (today's close < close x days ago) then score = -1

Add up the score for 10 comparisons; the score varies from + 10 to -10. If today's close is greater than all the previous closes, then the trend's score is +10; if today's close is less than all the previous closes, the score is -10. You could smooth? the data by adding fewer than 10 days or more than 10 days.

Trendscore = 10-day sum of scores from days 11 to 20

I begin my calculations at 11 days back from the present and go back another 10 days. Thus, I compare today's close to the closes from 11 to 20 days ago. If today's close is greater than all 10 closes, then the trend's score is +10. If today's close is less than the closes from 11 to 20 days ago, then the trend's score is -10. In sideways markets, the score ranges from +10 to -10. A positive score shows an upward trend bias. Similarly, a negative score shows a downward bias.

I prefer the 11- to 20-day period because it fits my trading horizon. A shorter time of comparison may be too volatile, producing frequent trend change signals, while a longer comparison time is slow to respond. During long trends, the trendscore remains at the outer limits, +10 or -10, for the duration of the trend. In sideways markets, the score doesn't remain at +10 or -10 for long, oscillating between these limits.

Note how the VHF indicates neither the sign nor the direction of the trend, while the trendscore indicates both the trend direction and trend strength.