Wow,....I realize this is my first post here but you guys are making this trend ID and measurement thing WAAY too difficult.
ID of trend can be as simple as following MA crossovers, or looking at MACD or ADX and drawing simple trendlines as mentioned earlier. For those that say that if I identify it then it will be too late and it will change is completely false. Depending on your time frame you may or may not be correct. There are many trends wihin trends. It just depends on time frame used. Maybe a micro trend is on 15 min TF, short term = 60 min, med = daily, longterm = weekly, but this is dependent on the trader andd how he defines longterm and short term. If the 2 or 3 MA all line up stacked one on top of other and price is on top of those that UP trend...simple. One could say if MACD > 0 you are in up trend and MACD < 0 downtrend. When it fluctuates between 1-2 boxes around the 0 line you have consolidation OR beginning a new trend. These are just examples of ways to figure it out at that point in time.
As for "measurement" of the trend I think too much focus on this has been deriving a certain number. Bottom line is you want to know if a "trend" is stronger than an index or benchmark stock or whatever you define as a "line" that you want to outperform. Looking at the ratio of RSI to that benchmark is quite easy to do. Plot a RSI of the ratio of IWM:SPY for example and you can see if IWM is "outperforming" the SPY if RSI is rising and vice versa. Again very visual and simple method.
Lastly, and probably more importantly, in my opinion is that it is LESS important to identify the strength and momentum of trends than it is to just identify that one exists in the first place. I assume most of us on here are shorter term traders and not buy and hold Buffett style investors. SO,..we SHOULD be able to OUTPERFORM the index (say SPY here) by JUST TRADING the TRENDS of index. As the index trends higher on say a 60 min or daily TF we go long. As it "trends" down we go short. Over a year there are many trends in all directions so we should be able to catch the MEAT of each of these and outperform. Now of course to get EVEN BETTER return we would like a trend that has MORE momentum/strength than the index trend itself. So "measurement" can boost returns but it is not the end all and be all of making money in a trend.
For those that think,...what does he know,...I have been trading for about 4 years now and YES I am profitable. My strategy focuses on trend trading.
Good Luck.
ID of trend can be as simple as following MA crossovers, or looking at MACD or ADX and drawing simple trendlines as mentioned earlier. For those that say that if I identify it then it will be too late and it will change is completely false. Depending on your time frame you may or may not be correct. There are many trends wihin trends. It just depends on time frame used. Maybe a micro trend is on 15 min TF, short term = 60 min, med = daily, longterm = weekly, but this is dependent on the trader andd how he defines longterm and short term. If the 2 or 3 MA all line up stacked one on top of other and price is on top of those that UP trend...simple. One could say if MACD > 0 you are in up trend and MACD < 0 downtrend. When it fluctuates between 1-2 boxes around the 0 line you have consolidation OR beginning a new trend. These are just examples of ways to figure it out at that point in time.
As for "measurement" of the trend I think too much focus on this has been deriving a certain number. Bottom line is you want to know if a "trend" is stronger than an index or benchmark stock or whatever you define as a "line" that you want to outperform. Looking at the ratio of RSI to that benchmark is quite easy to do. Plot a RSI of the ratio of IWM:SPY for example and you can see if IWM is "outperforming" the SPY if RSI is rising and vice versa. Again very visual and simple method.
Lastly, and probably more importantly, in my opinion is that it is LESS important to identify the strength and momentum of trends than it is to just identify that one exists in the first place. I assume most of us on here are shorter term traders and not buy and hold Buffett style investors. SO,..we SHOULD be able to OUTPERFORM the index (say SPY here) by JUST TRADING the TRENDS of index. As the index trends higher on say a 60 min or daily TF we go long. As it "trends" down we go short. Over a year there are many trends in all directions so we should be able to catch the MEAT of each of these and outperform. Now of course to get EVEN BETTER return we would like a trend that has MORE momentum/strength than the index trend itself. So "measurement" can boost returns but it is not the end all and be all of making money in a trend.
For those that think,...what does he know,...I have been trading for about 4 years now and YES I am profitable. My strategy focuses on trend trading.
Good Luck.
