Identify Quality Trend!

B

bvam1

Many discussions of trend on this board centered on identifying general trend. However, little discussions are found on the issue of gauging the strength of a trend. It is the purpose of this thread to share ideas that will aid a trader identify quality trend to follow.

Most of you are probably familiar with a trend-following strategy. It is said that when a trend is identified, the likelihood that it will continue is high. I am not here to refute this hypothesis, but rather to elaborate on it.

Assuming that this hypothesis has merits of its own, if a trader picks a quality trend to follow the probability of him/her making a profit is even higher than just following any trends. But how does one identify a quality trend?

Let's say that you have identified two possible up trends to follow (short, medium, long, or whatever your outlook is). One is showing that the price is increasing at an increasing rate, and the other's price is increasing at a decreasing rate. Now, which would you choose to follow? Why? Does your answer address your question on how to identify the strength of a trend, now?
 
Quote from bvam1:

Many discussions of trend on this board centered on identifying general trend. However, little discussions are found on the issue of gauging the strength of a trend. It is the purpose of this thread to share ideas that will aid a trader identify quality trend to follow.

Most of you are probably familiar with a trend-following strategy. It is said that when a trend is identified, the likelihood that it will continue is high. I am not here to refute this hypothesis, but rather to elaborate on it.

Assuming that this hypothesis has merits of its own, if a trader picks a quality trend to follow the probability of him/her making a profit is even higher than just following any trends. But how does one identify a quality trend?

Let's say that you have identified two possible up trends to follow (short, medium, long, or whatever your outlook is). One is showing that the price is increasing at an increasing rate, and the other's price is increasing at a decreasing rate. Now, which would you choose to follow?

Why?

Does your answer address your question on how to identify the strength of a trend, now?
More...
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Bvam1;
1]Helpful question;
a favorite study area.

2] A female trader in Chicago said show me the money;
so show me the charts or stock symbol now.

3]50 day moving average helps;
show me the charts/stock symbol. Need more info for sure.
:cool:
 
Quote from bvam1:

...But how does one identify a quality trend?

Let's say that you have identified two possible up trends to follow (short, medium, long, or whatever your outlook is). One is showing that the price is increasing at an increasing rate, and the other's price is increasing at a decreasing rate. Now, which would you choose to follow? Why? Does your answer address your question on how to identify the strength of a trend, now?
More...

Hi bvam1,

Are you talking about two different trends occurring at the same time...

One within the other ???

Are you talking about one particular trading instrument has one type of trend while a different type of trading instrument has a different type of trend...both occurring at the same time ???

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 
Quote from bvam1:

Many discussions of trend on this board centered on identifying general trend. However, little discussions are found on the issue of gauging the strength of a trend. It is the purpose of this thread to share ideas that will aid a trader identify quality trend to follow. ...
More...
If you could have made money buying, the trend was UP;
If you could have made money selling, the trend was DOWN;
If you made lots of money, the 'trend-quality' was strong;
If you made only a little money, the 'trend-quality' was weak.
:cool:
 
Quote from bvam1:

You still haven't answer my questions yet Murray...
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Bvam1;
Thats partialy truth , premarket,
the other part includes;
@ end of day like yesterday, still waiting for the specific stock symbols, need more info.

As for then /now question,
yes over time, GOOG below 50day moving average helped us short-swingtrade GOOG profit.

Howwever even though GOOG is still below 50dma;
it/QQQQ looks much stronger for 2-16 eod & now, looks like many polar bears covered,
so probably will not short GOOG today, unless end of day weak perhaps .:cool:
 
To clarify: (a better hypothetical example, I hope)

On a particular day, say 12/1/9000, your long-term trend outlook points upward indicating an up trend. At 10:15 am, the price is making higher high for the day, the question is do you buy here? Later in the same day at 2:00 pm, the price is making lower low for the day, do you sell here or buy? How do you know if the short-term trend is weak or strong to better time your entry? Furthermore, how do you know if this is or is not the point of trend reversal?

My idea is that you can gauge the quality of a trend by what the price is doing. Using the example above, let's say at 10:15 am, although the price is making higher high, the price is increasing at a decreasing rate. And at 2:00 pm, the price is decreasing at a decreasing rate. Using this new info., what would you likely do? I now know that at 10:15 am, the short-term up trend is slowing down, indicating a possible short-term reversal. If I buy at this point, it is likely that my position will show a loss, at least for a short-term period. But why do I want to even absorb the loss of a short-term pullback. If I time my long entry at 2:00 pm, when the short-term trend is weakening, it is likely that I will make short-term profit rather than a loss.
 
Quote from bvam1:

To clarify: (a better hypothetical example, I hope)

On a particular day, say 12/1/9000, your long-term trend outlook points upward indicating an up trend. At 10:15 am, the price is making higher high for the day, the question is do you buy here? Later in the same day at 2:00 pm, the price is making lower low for the day, do you sell here or buy? How do you know if the short-term trend is weak or strong to better time your entry? Furthermore, how do you know if this is or is not the point of trend reversal?

My idea is that you can gauge the quality of a trend by what the price is doing. Using the example above, let's say at 10:15 am, although the price is making higher high, the price is increasing at a decreasing rate. And at 2:00 pm, the price is decreasing at a decreasing rate. Using this new info., what would you likely do? I now know that at 10:15 am, the short-term up trend is slowing down, indicating a possible short-term reversal. If I buy at this point, it is likely that my position will show a loss, at least for a short-term period. But why do I want to even absorb the loss of a short-term pullback.

If I time my long entry at 2:00 pm, when the short-term trend is weakening, it is likely that I will make short-term profit rather than a loss.
More...

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Bvam1;
Agree with that as far as UP probabilities in a strong sector like oil/gas; most of them did do well by end of day, as you suggested ,even with gaps up.

Some in OIH sector did have a small loss, but still;
probabilities were mostly in favor of uptrend trending up,
and thats why many swingtraders enter late, as daytraders are exiting.:cool:

Settlement price of OIH apparently up 0.07%;
however at 15 minutes till close it wasnt so clear,
& would rather measure a trend to much than to little.:cool:

And exception to rule, price does not come up much or goes lower ,
or daily candle looks like a red can of red tomatoes;
med & short term trend may have reversed like oil/gas sector, early FEB.
Fine XLE sector uptrend now.

Mostly downtrends in TRB sector & TRB;
looks like red can of red tomatoes /daily candle
 
Quote from bvam1:

To clarify: (a better hypothetical example, I hope)

snip....

My idea is that you can gauge the quality of a trend by what the price is doing.

snip.....
More...

This is a good initial starting point. But it is only a small factor for determining "the quality" of a trend.

Using this idea of yours as you hnve presented it is a definite "no go" viewpoint and should not be used for considering any strategy for making money.

Price change is commonly accepted as the basis for making money in markets. Trends have great merit in the eyes of some money makers. These money maker types often do not bother to qualitatively measure the quality of a trend nor do they usually have a yardstick of possible measurements handy or available.

The reason they don't and are in the same boat as you (not having one) is because they focus otherwise.

Making money in trends, more likely, is related to effectively and efficiently harvesting the potential of the trend. Harvesting is a process rather than an assessment oriented endeavor.

Anyone who wishes can devise a method of monitoring and recording the cumulative amount of money that is being made available. This can be normalized with respect to the actual real ability any trader has to participate and collect the money stream.

Those that make the effort, can and do evaluate how effective and efficient they are in this collecting process. They, in effect, then, are measuring their relative quality of performance compared to what is being offered.

When a person looks at and engages in trading trends, the person is not generally engaged in completing trading cycles as he gains in performance quality. People who do trading cycles are not in the market very much of the time the market is open for trading. They are predominantly on the sidelines during market trading hours.

On the other hand, a person who trades trends is one who makes it his business to be in the market at all times when the price is changing. As price changes, the person is in the market and is "participating" in the price change. when the direction of the price change remains the same, the trader retains his position. If the direction of price change become different, the trader accomodates this, concurrently and continues to participate in the price change.

naturally, a consequence of these concurrent actions of the market and the trader, is that the trader "banks" a capital transfer at the time of each of his appropriate actions to remain current in his position according to the direction price is taking.

You, yourself, may want to look into trend "quality" as a measure of the money velocity "speedometer" that most money making trend trader use. It is likely that it is available on your trading platform as an account measure which can easily be calibrated into a velocity (change over time). While price moves as a vector, the account balance is unidirectional (increasing as a consequence of the currect trading positioning).

The most common type of segmenting of trading when trading as a trend follower, is the use of reversals of position with market orders. A few ET traders have posted prints of successive trades that are usually based upon one trading fractal. A handful have posted concurrent trading in one account using pairs of concureent trends on differing fractals in the same market. Google AMTSWA as the partial name, for example.

Your idea and subtending example , as posted, is a non starter.
 
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