How do you determine trend direction?
- Thread starter jpvil123
- Start date
Well 1st you need to determine what time frame you want to trade in. Then you could use a higher time frame to see overall trend.
So we have 2 cases:
1) Both time frames are trending in the same direction, and you look for a trade setup based on your rules.
2) The current time frame is counter trending against the higher time frame. So here it becomes harder, since you again have 2 cases:
a) There is a full reversal that will show up on the higher time frame later.
b) This is a small pullback within an overall trend.
I determine trend 2 ways. 1st, I look at FA which is the underlying reason for the current PA. Then I see on the chart if PA agrees with FA.
So we have 2 cases:
1) Both time frames are trending in the same direction, and you look for a trade setup based on your rules.
2) The current time frame is counter trending against the higher time frame. So here it becomes harder, since you again have 2 cases:
a) There is a full reversal that will show up on the higher time frame later.
b) This is a small pullback within an overall trend.
I determine trend 2 ways. 1st, I look at FA which is the underlying reason for the current PA. Then I see on the chart if PA agrees with FA.
L-L...I'm surprised. That's a lot of words coming from you.Well, first off...you'll never know for sure, or atleast w/ a very high or confident degree of certainty.
You have to constantly have an open mind, and be prepared for how the market will throw at you. and act accordingly at that present moment.
Basically try to have a macro, big, wide viewpoint...imagine...you're looking at the DOW's day chart After the market has closed. Only then is it Crystal clear...and you can kind of then...more or less...have logical reasons why the market behaved the way it did that day.
It's not enough to trade solely based on blind ...silly...indicators and what not -- you need to have a certain degree of foresight and intuition. and rationale.
Happy trading, Ace
Fastest and most reliable trend indicator is higher or lower prices. Retracements can always fuck you up though. Any model trying to compensate for that will inevitably fail / become limited at times. It is a hard problem to deal with. As long as SL is wide though, lesser retracements cant hurt you.
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What if instead of trends you instead focused on price moves (up/down) and used some kind of reversal filter to determine if the current up move or down move was still in motion?
Whether a market is range bound or "trending", all it's really doing is moving up or down in various strengths and durations. Up/down/up/down/up/down. All day. Every day.
Whether a market is range bound or "trending", all it's really doing is moving up or down in various strengths and durations. Up/down/up/down/up/down. All day. Every day.
You start by understanding clearly that a "trend" is something that exists only with reference to a specific, defined time-frame, and that it's common for any financial instrument to be trending in one direction on one time-frame and in the opposite direction on a different time-frame.
And then you apply one of the following two methods ...
1. (Good method): print out a simple bar-chart with no indicators, pin it on your wall, stand about 10 feet away from it and see whether or not you can identify a clear trend, at a glance, from that distance - if you can't there probably isn't one;
2. (Less good method): draw 15-period and 50-period simple moving averages on the chart. If the 15-period one is above the 50-period one and both are rising and diverging, there's probably an uptrend on that time-frame; if the 15-period one is below the 50-period one and both are falling and diverging, there's probably a downtrend on that time-frame; the other 80% of the time, when neither of the above two sets of conditions prevails, there probably isn't a clear trend on that time-frame.
Actually the OP is correct, just because there's a high timeframe move doesn't mean it will go that way. You have waves within waves and if you catch the wrong one even with a high timeframe confirmation it can equally do the same damage. It's about testing whether you, actually the psychology of those trading at that level, placed the trade in the exact correct location, if not you can with a high degree of certainty be sure the market will retrace to the 'correct' level taking out anything in its way.
The main issue with the higher timeframe principle is that what if there's a higher timeframe above that doing something different, or above that, or above that. The premise worked in low volatility, but with higher volatility a daily or weekly can whipsaw a 60m in to oblivion and then your 5m trade becomes an insignificant little morsel which is compounded by the fact that you only get 1-2 high probability 5m trades per week per instrument.
It works for a good percentage of the time, but when it doesn't it's quite spectacular and will often be so severe that it destroys whatever you made with your 5m/60m setup. Why, because it's really hard work to keep looking up and down timeframes for something that is, in most peoples eyes, a fat-tail event with the millions of potential outcomes, so most discard them. Then it comes along and they fight the trade trying to understand why it's not working, and there goes their capital. Some learn and then everything goes well for a time and one day they forget or don't believe it will happen again so they don't check the fat-tails and voila, history repeats.
All roads lead to psychology, understand yourself and your strengths and weaknesses without admitting them externally, you will be rewarded, anything else and bye bye account! So what's the simplest way to find a trend, pre-identify a fat-tail, wait for it to happen and click the button. It's against 99% of all traders as they are in shock that it happened, are too busy fighting a losing trade, or don't have the capital or confidence to click the button. Everything else is a percentage game of effort vs reward, where those same 99% get it wrong.
The main issue with the higher timeframe principle is that what if there's a higher timeframe above that doing something different, or above that, or above that. The premise worked in low volatility, but with higher volatility a daily or weekly can whipsaw a 60m in to oblivion and then your 5m trade becomes an insignificant little morsel which is compounded by the fact that you only get 1-2 high probability 5m trades per week per instrument.
It works for a good percentage of the time, but when it doesn't it's quite spectacular and will often be so severe that it destroys whatever you made with your 5m/60m setup. Why, because it's really hard work to keep looking up and down timeframes for something that is, in most peoples eyes, a fat-tail event with the millions of potential outcomes, so most discard them. Then it comes along and they fight the trade trying to understand why it's not working, and there goes their capital. Some learn and then everything goes well for a time and one day they forget or don't believe it will happen again so they don't check the fat-tails and voila, history repeats.
All roads lead to psychology, understand yourself and your strengths and weaknesses without admitting them externally, you will be rewarded, anything else and bye bye account! So what's the simplest way to find a trend, pre-identify a fat-tail, wait for it to happen and click the button. It's against 99% of all traders as they are in shock that it happened, are too busy fighting a losing trade, or don't have the capital or confidence to click the button. Everything else is a percentage game of effort vs reward, where those same 99% get it wrong.
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The keyword you used above is sometimes eliminates the move.
Simply, you need to be more patient and wait for the sometimes when all the ducks are lined up for you...that's when you trade. Its like any other trade signal. Its a waiting game and you need to have discipline and to do just that...wait...regardless if you're seeing good price movement while your waiting in which your trade signal didn't show up to get you in on that good price action.
Too many traders don't want to wait for everything to line up via their trading plan. Thus, they become impatient and start tweaking (changing) their trade method to get more trade opportunities or to speed things up sort'uv speak. Worst, they start taking trades when there's no trade signal.
in this game 99.9% - loosers
assuming one is not considering himself the looser, then automatically the others around him are.. then why one would need opinion of others?
especially if
assuming one is not considering himself the looser, then automatically the others around him are.. then why one would need opinion of others?
especially if