How would you test for trendiness?

You can use indicators, trend lines etc to tell you what the trend is, but as far as I know they are all relative. I don't know of anything that will tell you the price is moving up a certain amount per unit of time. If there is, I'd like to know. For instance, a chart where the price is moving up 5 cents a minute can look the same as a chart where it's moving up 10 cents a minute depending on how the scales are set.

I like to set the price scale for a constant price range. I also set the time period that the chart sees for a constant 2 hours. That way I can compare apples to apples from one day to the next.
 
Quote from jerryz:

i am thinking along these lines...

the best trends are the ones that
1) steadily go in one direction
2) have very few pullbacks, and
3) when there are pullbacks, they are small

how would you go about measuring this? what statistical measure would you use?

then i'm thinking...

say you have 2 markets. one market is much more volatile than the other. within a certain time frame, the more volatile market should show more trends. however, this doesn't necessarily mean that the more volatile market is more trendy than the less volatile one. it's just that it's more volatile. within a certain time frame, you will also see more "fake trends" and pullbacks in the more volatile market.

so then i'm thinking...

how do you account for volatility when measuring trendiness? what statistical measure would you use? when a market goes up say 10 days in a row, how can you measure if that's just an expected occurrence given the volatility, or if the market is truly trending?

do you guys agree/disagree? any ideas? thanks.
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Would mostly agree with that, except;
some of the most talented trend riders[say Schwager interviews],
would NOT define derivative pullbacks as small.:D

However on a stock, measured by 200, 50 day moving averages;
would be important in a series of favorite measurements.:cool:

And while William O'Neil has helped much in stock market ;
much of trend help/measures has come thru big trend traders in derivatives,
even though i prefer smaller drawdown of NYSE, some NasdaQQQQ stocks.

Wisdom is the principal thing.
 
Trend is the stuff used by the market to pull your legs. If you can quantify that pull you have tamed the market. That is why all experts add "until it bends" to "The trend is your friend".
:D
 
Quote from Sam Mcgee:

You can use indicators, trend lines etc to tell you what the trend is, but as far as I know they are all relative.

I don't know of anything that will tell you the price is moving up a certain amount per unit of time. If there is, I'd like to know.

For instance, a chart where the price is moving up 5 cents a minute can look the same as a chart where it's moving up 10 cents a minute depending on how the scales are set.

I like to set the price scale for a constant price range. I also set the time period that the chart sees for a constant 2 hours. That way I can compare apples to apples from one day to the next.
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Good point on using the same yard stick;
apples to apples.

Something to '' tell you price moving up a certain unit of time'';
prices recorded on notebook /paper-end of day,
works as a measure, over much time.:cool:

The apple trees planted in backyard;
took 1-10 years to bear fruit.:cool:
 
Trend/bend Quote from cooldude:

Trend .
That is why all experts add "until it bends" to "The trend is your friend".
:D
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Prefer the stock trends that don't bend much ;
much more than the trends that bend a bunch frequently .

However some of the best trend traders prefer trends that bend much ;
derivatives for example.

And like the derivative traders look on;
%, or %% a month.:cool:
 
Statistically, if a market is random, then all prices will be held nominally within two standard deviations of the mean.
Thus, trendiness is the propensity for the market to move outside of a two standard deviation range of the mean.
mathematically if you are interested in finding trendiness of commodities or stocks you find out the kurtosis. Positive kurtosis means more trendiness as it means the distribution has more fat tails.
 
One simple method to test for trendiness is the variance ratios. For example if the adjusted volatility on an hourly sampled basis turns out to be higher than the volatility on a daily sampled basis , the market can be considered as mean reverting. If you are looking for longer term trends compare the daily sampled volatility with the weekly sampled. The adjust factor is sqrt(5). There are better methods but this is simple and easy to program.

Regards
 
Quote from jerryz:

i think you guys are answering a different question. i'm not asking about how to find a trend or how to catch a trend.

i am looking for a statistical measure or something similar. how would you measure whether one market is more or less trendy than the other?
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i would use a MACD or a triple cross over. they tend to be profitable during trend, unprofitable during sideways movements. I use bloomberg backtesting, it shows P^L for a set of parameters. I would like to find a good backtesting programs i can use at home.

If you dont have the software, you can do it manualy by plotting the points of the graph and recording the prices at that time...then number crunch away...takes time...but hey..so does trading profitable i understand!
 
So this means that the smaller the time frame, the steeper the trend (because of the sqrt adjustment).

jerryz,

Question: what would you perceive as "trendier" a steeper slope or a longer slope or a smoother slope?
Quote from gbos:

One simple method to test for trendiness is the variance ratios. For example if the adjusted volatility on an hourly sampled basis turns out to be higher than the volatility on a daily sampled basis , the market can be considered as mean reverting. If you are looking for longer term trends compare the daily sampled volatility with the weekly sampled. The adjust factor is sqrt(5). There are better methods but this is simple and easy to program.

Regards
More...
 
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