ES Trend Following

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hello i have questions........

http://www.elitetrader.com/vb/attachment.php?s=&postid=3419333

the question is about this chart above.......

how you know where to put higher low? what i mean is..... how you decide to mark something 'higher low' or wait until something else.

example see higher low you have at 4 Jan 12:00 on chart. see that?
ok, look 4 candle earlier is "hammer" candle.
what if you at that time make the hammer candle as "higher low"
then that hammer low get broken 4-5 candle later and you are short.
but price reverse and start up again......
you see what i mean?
so you stop out of short and reverse long maybe?
please exaplain...


another question.......
what you do when market going sideways???

in time of that chart market either going up or down.

somtimes market will go sideways and have fake breakout/ breakdown stuff.

how you trade in those time? just take small losings and wait for trend to come again??

many thanks to you
 
Quote from Pigsky:

hello i have questions........

http://www.elitetrader.com/vb/attachment.php?s=&postid=3419333

the question is about this chart above.......

how you know where to put higher low? what i mean is..... how you decide to mark something 'higher low' or wait until something else.

example see higher low you have at 4 Jan 12:00 on chart. see that?
ok, look 4 candle earlier is "hammer" candle.
what if you at that time make the hammer candle as "higher low"
then that hammer low get broken 4-5 candle later and you are short.
but price reverse and start up again......
you see what i mean?
so you stop out of short and reverse long maybe?
please exaplain...
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That is a problem I would rarely encounter because I don't take note of candle formations, and we are able to identify a valid swing fairly accurately. I look at this whole thing differently.

If you take into account the size of a swing of roughly 30pts up and down, you are in a much better position to differentiate a random low from a relevant low. I would define a swing in an uptrend as follows: a minor reaction that does not penetrate a previous important low, followed by a reversal recovery which breaks and stabilizes at a higher high. So in the screenshot you referred to, you can see how the price makes one swing of about 30pts after another while breaking and stabilizing at new highs. Then you have enough evidence to adjust your stop and continue to participate in the trend.

another question.......
what you do when market going sideways???

in time of that chart market either going up or down.

somtimes market will go sideways and have fake breakout/ breakdown stuff.

how you trade in those time? just take small losings and wait for trend to come again??

many thanks to you
More...

In the course of this thread, there have been a few phases in which I stayed on the sidelines after a stopout. There was no new entry opportunity given during that time and that has helped me to avoid overtrading. I cannot quite help you with this question but my observation is that there are always trends in the 4H. Time will tell how we are going to address ranges in future. What I can say is that if we adhere to a few basic rules, all price action in trend patterns make sense and have a lot of logic.
 
Quote from Pigsky:

what you do when market going sideways???
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So, just like when you are trading in a trend after your definition has been validated, the same thing occurs when you identify a range. A range trade should be put on near the previous high, with a stop some logical distance from the previous high/low. If you are in a true range, then the trade will not break out strongly, therefore a stop should be placed around where a 'breakout' would occur. Range vs trend trades have very little difference. The most important thing is to remember and protect yourself if you are wrong.

This thread's title is trend following, not range trading. Range trading is comparable to RTM I think. I think range trading would be slightly more complex than trend following.
 
Matt: Your explanations & pictures have *I hope* solved my consistent income problem. The pictures and descriptions that you have made demonstrate the repeating pattern that trends form in every market.

I've adapted a trading approach almost identical to yours now, for the time being. I'm using 4 hour charts, looking for a specific (but subjective) pattern and place my stops at peaks and valleys formed, with initial stops below/above the last part of the pattern I see. Very, very low risk, and keeps me in the trade should I be correct.

I forsee in the future being able to accomplish this technique in the intraday time frame. This would allow for much higher R/R ratios it seems, because depending on the time frame you chose, you could stack more contracts, and your inital risk could possibly be less than trading on a 4 hour chart. 4 hours is great for those who don't want to watch the market all day. It's easy to see most of the imporant highs and lows that make up the dominant trend. If you downsize your timeframe, you will see the trend pattern is just as prevalent as in the higher time frame, but occurs much faster. The basis of your technique will keep you in the trade if you are correct, and protect your behind if you are not. Is this trading perfection?
 
Quote from masterm1ne:

The basis of your technique will keep you in the trade if you are correct, and protect your behind if you are not. Is this trading perfection?
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Close to perfection :) In my opinion, this is the sole way of consistent trading because you do what the market does and what it tells you to do (such as where to put the stop). It is objective, and it is an everlasting way to trade. Gone are the subjective methods of 2 tick stops and 3pts profit targets. This does not even get close to grasping the root causes of market movements. I haven't looked at intraday time frames from a trend following perspective (mainly because the definition of trend following highly contradicts with day trading). It might work. I would only give it a try after you've fully understood the 4H. Trading can be easier intraday if you understand the larger time frames. Looking forward to your results!
 
Short @ 1356.25, Stop @ 1366.00

It's time to short again. We are back to the ubiquitous resistance area near 1370 (see weekly chart for your reference), precisely the level we touched on May 3, 2011. Now I'm observing how bulls are being rejected a second time (02/20 and 02/24), which confirms the overhead supply here. Therefore a break of visible support at 1355 marks a legitimate shorting opportunity to participate in a reaction. The nearest relevant peak at which I would consider this trade a fail is 1365.
 
first its impressive that u waited till now. lot of ranging days OMG. ok so u shorted close to top high of 4 years and none of stronger support line were broken, only a double top. So this is cool. Good luck
p.s. right behind U :)
 
Quote from Bombardier:

Short @ 1356.25, Stop @ 1366.00

It's time to short again. We are back to the ubiquitous resistance area near 1370 (see weekly chart for your reference), precisely the level we touched on May 3, 2011. Now I'm observing how bulls are being rejected a second time (02/20 and 02/24), which confirms the overhead supply here. Therefore a break of visible support at 1355 marks a legitimate shorting opportunity to participate in a reaction. The nearest relevant peak at which I would consider this trade a fail is 1365.
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