Market Trend Analysis Using GammaEdge’s Market Trend Model
Table of Contents
Have you ever watched the market rally for days while you sat on the sidelines, wondering how you missed the signs?
Or worse, jumped into what looked like a strong trend, only to get chopped up in sideways action?
Here’s a hard truth…Most traders struggle with market trend analysis.
They rely on lagging indicators like moving averages, RSI/MACD, or confusing technical patterns that tell you where price has been—not where it’s headed.
This creates a painful cycle (that we’ve all experienced before):
- You enter what looks like a strong trend, only to get stopped out
- You sit out what seems choppy, only to watch the market trend powerfully
- You second-guess yourself constantly, unsure if what you’re seeing is noise or signal
Trading with the market’s trend is like sailing with the wind at your back—it’s simply easier than fighting against a headwind. While most traders agree with this concept in theory, executing effective market trend analysis in practice can be challenging:
- How do you accurately identify the market’s trend direction?
- How do you know when that trend might be changing?
The Root Problem With Traditional Market Trend Analysis
Traditional indicators don’t show you what’s actually happening under the surface of the market. They don’t reveal the real-time buying and selling pressure driving price movement.
That’s exactly why we developed the Market Trend Model (MTM).
Unlike traditional lagging indicators that only show where price has been, the MTM provides a window into actual market flows happening right now. This distinction is crucial—it’s the difference between looking in the rearview mirror versus seeing what’s directly ahead of you.
Let’s dive in and discover how this powerful market trend analysis tool can help you catch trends earlier, avoid choppy markets, and trade with greater confidence.
By the end of this article, you’ll understand:
- What the Market Trend Model is and what makes it unique for market trend analysis
- How to interpret each component of the model
- How to identify clear trend signals for bullish and bearish conditions
- Practical ways to implement this key tool in your very next trading session
What is the Market Trend Model?
The Market Trend Model stands apart from traditional market trend analysis indicators in one crucial way: it tracks actual market transactions rather than just price patterns.
Think of it like this: watching price alone is like trying to predict the weather by looking at the sky. The MTM is like having a weather radar that shows you the actual storm systems forming before they reach you.
The Market Trend Model serves as GammaEdge’s primary tool for gauging market trends and momentum in real-time. What makes the MTM special is that it’s inherently transactional, meaning it moves with each buy or sell transaction that affects market prices.
At its core, the MTM tracks “ticks”—each individual transaction that moves price up (uptick) or down (downtick).
For example, whether someone buys 10,000 shares or just one, if the transaction pushes the price upwards, it counts as a single “uptick.” Similarly, transactions that push prices down register as “downticks.” By compiling these upticks and downticks over time, we create a comprehensive market trend analysis view that evolves throughout the trading day (and over multiple days/weeks).
The MTM’s greatest strength is it gives you a multi-timeframe perspective all in one chart:
- What’s happening right now (immediate market sentiment)
- Short-term trend direction (1-3 days)
- Longer-term market momentum (multi-week)
This powerful combination helps you understand not just where the market may be heading, but how strong the tailwinds behind the move have been.
Core Components Of The Market Trend Model
The Market Trend Model may look complex at first glance, but it’s actually quite straightforward once you understand its components.
There are three primary components that we will focus on, each providing a directional view through the lens of a specific timeframe:
Each component operates on a specific timeframe that you should keep in mind:
- The Cumulative Tick (CT) shows immediate intraday momentum, updating in real-time throughout the trading session
- The Short-Term Railroad Tracks represent the 1-3 day trend direction, helping you understand the past several day’s behavior
- The Rainbow Ribbon displays the multi-week trend perspective, ideal for swing trading decisions
Understanding these timeframes helps you correctly interpret signals and apply them to your specific market trend analysis needs, whether you’re day trading or looking for multi-week positions.
Let’s now break down each component further…
1) The Cumulative Tick: Your "Here & Now" Indicator
What is it?: The Cumulative Tick (based off the TICK Index) is the backbone of the MTM and is a representation of the immediate buying and selling pressure in the market — think of it like the market’s pulse. You’ll see it as the white line that typically moves from the lower left to the upper right of the chart when markets are bullish (or the reverse when markets are bearish).
How it works:
- Every uptick (price-moving-up transaction) pushes the CT higher
- Every downtick (price-moving-down transaction) pushes the CT lower
- The slope of the CT shows you real-time market strength or weakness
Think of the CT as your immediate market sentiment indicator.
When it’s trending higher, buyers are in control and pushing prices up. When it’s trending lower, sellers are in control.
The steeper the slope, the more aggressive the buying or selling pressure. Persistent buying through a session (taking the form of a 45 degree angle) is what we call a “linear up day” – this is the strongest intraday signature we can see in market trend analysis.
What makes it powerful: The CT shows you what’s happening RIGHT NOW, not what happened 5, 10, or 20 periods ago. This real-time view helps you catch strong intraday moves or even identify trend changes as they’re developing, not after they’ve already occurred.
And to reiterate a key point, the CT’s slope is critical to monitor—steeper upward slope means stronger buying pressure; steeper downward slope means stronger selling pressure.
2) Short-term "Railroad Tracks": The 1-3 Day Trend
What is it?: In the Market Trend Model, you’ll notice three white moving average lines that move together. We call these the “Railroad Tracks” because when properly aligned, they resemble train tracks running parallel to each other.
How it works:
- These moving averages track the trend over a 1-3 day period
- When they’re “stacked” in the same direction, it confirms a short-term trend
- Their relationship to the CT adds another layer of confirmation
The Railroad Tracks give you a short-term market trend analysis perspective that helps validate what you’re seeing in the CT. When both components are moving in the same direction, you have a stronger confirmation of the trend.
What to look for: Pay special attention to how these tracks are aligned:
- Bullish alignment: All three lines stacked and trending higher, with the CT above them (and trending higher as well)
- Bearish alignment: All three lines stacked and trending lower, with the CT below them (and trending lower as well)
- Choppy conditions: Lines are intertwined with no clear direction
3) The Rainbow Ribbon: The Long-Term Trend
The multi-colored moving average ribbon (hence “rainbow”) represents the longer-term market trend (typically multi-week). This component helps you stay aligned with the bigger picture when making market trend analysis decisions.
When analyzing the Rainbow Ribbon, we focus on the red and cyan moving averages as key reference points. The red line (fastest) reacts more quickly to market changes, while the cyan line (slowest) shows the more established trend. Their relationship—whether red is above (bullish) or below cyan (bearish)—and their directional movement provide the clearest signal of longer-term market sentiment. The other colored lines help visualize the overall trend structure but are secondary to these two key indicators.
How it works:
- The colored moving averages show the longer-term direction of the market
- Pay particular attention to the red (fastest) and cyan (slowest) moving averages
- Their relationship to each other shows trend strength
What to look for:
- Bullish alignment: Red moving average above cyan, both trending higher
- Bearish alignment: Red moving average below cyan, both trending lower
- Potential reversal: Red and cyan moving averages converging and changing direction
The rainbow ribbon is especially valuable for swing traders who need to understand if their shorter-term trades align with the bigger market picture. It helps you avoid fighting against a strong prevailing trend.
NOTE: The long-term moving averages are not as critical for intraday traders; however, it’s always best when the short-term and long-term timeframes are aligned for comprehensive market trend analysis.
BONUS: The Filtered Tick: Measuring Significant Buying/Selling
Volume (the size of transitions) doesn’t impact the CT. To track the sheer size of orders, we’ve created the Filtered Tick (FT), which identifies block trades greater than +/- 1,000 Ticks in either direction (aka big transactions!). This provides a real-time reading of institutional activity—whether they are aggressively buying or selling.
Ideally, we want to see the movement FT align with price action, which acts as a powerful tool to confirm intraday trending moves, as well as over several days, where we would see consistent FT movements in the direction of the prevailing trend.
NOTE: The FT resets daily and is presented as the thick cyan line near the top of the Market Trend Model chart.
Reading the Market Trend Model: Real-World Examples
Now that we understand the components, let’s look at what clear bullish and bearish signals look like in the Market Trend Model for effective market trend analysis.
Bullish Market Structure
A bullish Market Trend Model has the following characteristics:
- Cumulative Tick: Trending strongly higher with a positive slope
- Railroad Tracks: Properly stacked with clear upward momentum
- Rainbow Ribbon: Red and cyan moving averages both trending higher
- Additional Confirmation: The CT remains consistently above the railroad tracks and we see Filtered Tick buying
In a bullish market structure, the CT makes consistent progress to the upside throughout the session, pulling the railroad tracks higher. The MTM shows harmony across timeframes, with both short and long-term indicators confirming the uptrend.
Here’s what this typically means for traders:
- It’s favorable to look for long entries, especially on pullbacks
- The probability of upside continuation is high
NOTE: The MTM is NOT predictive, but it does show momentum across multiple timeframes. As you continue to study and review the MTM daily, you will come to understand what the various components are telling you about momentum in the market and where the tailwinds vs. headwinds reside.
Bearish Market Structure
A bearish Market Trend Model has the following characteristics:
- Cumulative Tick: Trending lower with a negative slope
- Railroad Tracks: Stacked in descending order and trending down
- Rainbow Ribbon: Red moving average below cyan, both moving lower
- Additional Confirmation: The CT consistently remains below the railroad tracks with large Filtered Tick selling
In a bearish structure, you’ll see the CT making consistent progress to the downside, dragging the railroad tracks lower. All timeframes show alignment toward the downside, confirming the downtrend.
For traders, this typically means:
- It’s favorable to be in cash, or looking for short entries, particularly on bounces (if you have that skill set)
- The probability of downside continuation is high
Warning Signs: When Trends Change
One of the most valuable aspects of market trend analysis with the Market Trend Model is how it helps identify potential trend changes before they become obvious in price. Here are key warning signs to watch for:
Bullish to Bearish Transition:
- CT breaking down through uptrending Railroad Tracks (key bearish signal)
- Railroad Tracks rolling over and trending lower
- Filtered Tick showing significant institutional selling
Bearish to Bullish Transition:
- CT breaking up through downtrending Railroad Tracks
- Railroad Tracks beginning to stack properly to the upside
- Increased institutional buying shown on the Filtered Tick
The MTM excels at providing early warnings before major moves develop. This is particularly valuable for avoiding poorly timed entries or protecting profits on existing positions.
Practical Implementation: Your Trading Game Plan
Now that you understand the components and signals of the Market Trend Model, let’s focus on how to actually implement this in your market trend analysis:\
Step 1: Check the MTM Before Market Open
Start your trading day by examining the Market Trend Model to understand the current market context:
- What direction is the CT trending?
- Are the Railroad Tracks properly stacked and in which direction?
- Does the Rainbow Ribbon confirm the short-term trend?
This initial check gives you a directional bias for the day and helps you determine which types of setups to look for.
Step 2: Use the MTM to Define Your Trading Approach
Based on what you see in the MTM, adjust your trading approach:
Strong Bullish MTM:
- Focus on long setups, particularly on pullbacks
- Look for stocks with strong call-dominated structures
- Avoid fighting the trend with short positions
Strong Bearish MTM:
- Prioritize short setups (or reducing long exposure or sitting in cash), especially on bounces
- Focus on stocks with put-dominated structures
- Avoid bottom-fishing or trying to catch falling knives
Choppy/Unclear MTM:
- Reduce position sizes
- Tighten stops
- Consider sitting out or only taking the highest probability setups
Step 3: Monitor for Intraday Changes
The Market Trend Model updates throughout the day, so keep an eye on it for potential trend shifts:
- Watch for the CT crossing above or below the Railroad Tracks
- Monitor for changes in the slope of the CT
- Pay attention to significant Filtered Tick activity, which shows institutional involvement
These intraday signals can help you adapt your market trend analysis strategy as conditions evolve throughout the session.
Step 4: Use the MTM for Exit Decisions
The MTM isn’t just for entries—it can also guide your exit decisions:
- Consider taking partial profits when the CT begins to flatten
- Consider exiting (at least some) long positions when the CT breaks below Up-Trending Railroad Tracks
- Consider exiting (at least some) short positions when the CT breaks above down-trending Railroad Tracks
By incorporating the MTM into both your entry and exit decisions, you create a cohesive trading approach that stays aligned with market momentum.
Common Questions About Market Trend Analysis Using The MTM
This looks too complex—I already have enough indicators. What do I do?
Unlike traditional indicators that add another layer of complexity, the MTM provides a window into actual market activity. It shows you real buying and selling flows, not just price patterns. Think of it as X-ray vision into market structure rather than another technical indicator to interpret.
I'm a swing trader—why should an intraday tool matter to me?
Every multi-day trade starts as a day trade. Getting that first day right is crucial for swing trading success. The MTM helps you avoid entering swing trades against major market flows, which is often the difference between winning and losing positions.
By the time I see the signal, isn't it too late?
The MTM excels at providing early warnings before major moves develop. For example, you might see the CT breaking through the Railroad Tracks while price is still near recent highs or lows. This early signal gives you time to adjust your positioning before the move fully develops.
The real value isn’t just catching moves—it’s preventing bad trades by showing you when conditions don’t support your bias.
I'm a 0DTE trader—how can the MTM help my intraday strategy?
For 0DTE traders, the MTM offers powerful intraday signals through two key components:
- Cumulative Tick (CT) slope: Focus on the immediate slope of the CT throughout the trading session. A consistently rising CT indicates strong buying pressure and supports upside momentum trades, while a declining CT shows selling dominance and favors downside plays. The steeper the slope, the stronger the momentum in that direction.
- Filtered Tick confirmation: Watch for Filtered Tick signals (which only trigger on significant ±1,000 tick movements) that align with the CT’s direction. When you see multiple Filtered Tick signals in the same direction as the CT slope, it indicates institutional involvement and significantly increases the probability of your directional trade working.
This simple CT slope + Filtered Tick confirmation approach helps you identify high-probability intraday momentum trades without overcomplicating your market trend analysis.
Taking Action: Your Next Steps
Now that you understand the Market Trend Model for improved market trend analysis, here’s how to start implementing it right away:
- Familiarize yourself with the visual components: Spend time observing how the CT, Railroad Tracks, and Rainbow Ribbon interact with price movements.
- Practice identifying clear signals: Look for instances of bullish and bearish alignments across all three components.
- Start small: Begin by using the MTM as a confirmation tool for your existing trading approach before making it a primary decision factor.
- Keep a trading journal: Document how the MTM signals correlate with your trade outcomes to build confidence in the tool.
- Join our community: Share your observations and questions about the MTM in our Discord community to accelerate your understanding.
Final Thoughts
The Market Trend Model is one of the most powerful tools for market trend analysis in the GammaEdge framework, providing a clear, multi-timeframe perspective into market momentum and trend. By understanding the interplay between the Cumulative Tick (and Filtered Tick), Railroad Tracks, and Rainbow Ribbon, you gain a comprehensive view of market conditions that can significantly improve your trading decisions.
Remember, successful trading isn’t about predicting the future—it’s about recognizing the current market environment and positioning yourself accordingly. The MTM helps you do exactly that by showing you who’s really winning the battle between bulls and bears across different time frames.
After reviewing this article, you should have all you need to start implementing the Market Trend Model into your market trend analysis system as soon as the next trading session. We’re confident you’ll quickly see how staying aligned with the market’s true momentum can transform your trading results.
Happy trading!