What's a good tool to determine if the market is trending or consolidated ?

Hugin · Sep 3, 2011

Quote from FreakofNature:

Two things I had considered

ADX or/and the slope of moving averages.

However, i have absolutely no experience with technical indicators so any help is deeply appreciated.

Thank you much for your time.

FoN

One problem with many of the methods commonly used to identify trends is that risk confuse trends with volatile markets. The method described in the paper below claims to avoid such problems.
http://www.eurekahedge.com/news/attachments/Amplitude_Examining_Trend_Characteristics.pdf

kut2k2 · Sep 3, 2011

Quote from Hugin:

One problem with many of the methods commonly used to identify trends is that risk confuse trends with volatile markets. The method described in the paper below claims to avoid such problems.
http://www.eurekahedge.com/news/attachments/Amplitude_Examining_Trend_Characteristics.pdf

"The TI(n) for a specific time t is calculated by doing a linear regression on the n minutes around t (n/2 before t and n/2 after)."

Oops. There goes its applicability to trading, which is a real-time application that naturally doesn't allow peeking into the future.

IMO the best public domain trend indicators are still Kaufman's Efficiency Ratio and Blau's TSI, but of course they have their flaws as well.

Lucrum · Sep 3, 2011

Quote from FreakofNature:

What's a good tool to determine if the market is trending or consolidated ?

kut2k2 · Sep 3, 2011

Quote from Lucrum:

Quote from CrackPipe:

i've found the most useful tool is my eyes.

kiss.

Quote from HandofGod:

Your eyes

All you eyeball guys crack me up. Try doing that for scores of instruments every trading day for the rest of your trading lives. There's a reason why machines and other technologies are sooo popular world-wide.

FreakofNature · Sep 3, 2011

Ya if i want to know the trend or lack of I just look at the timeframe im trading and draw some channels using my eyes, nothing will ever top that.

I get it....

Now try it for thousands of instruments

FoN

Lucrum · Sep 3, 2011

Quote from kut2k2:

All you eyeball guys crack me up. Try doing that for scores of instruments every trading day...

Is it possible not everyone watches scores of instruments?

kut2k2 · Sep 3, 2011

Quote from Lucrum:

Is it possible not everyone watches scores of instruments?

Of course. In that case, the eyeball works great without danger of overworking it. But not everyone watches only a single instrument either.

Hugin · Sep 7, 2011

Quote from kut2k2:

"The TI(n) for a specific time t is calculated by doing a linear regression on the n minutes around t (n/2 before t and n/2 after)."

Oops. There goes its applicability to trading, which is a real-time application that naturally doesn't allow peeking into the future.

Well, trend indicators needs some kind of window over which the trend is calculated. They just state that the trend estimate is calculated for the center point of the interval. It is trivial to adjust to only use historical data points and use the regression estimate as an indicator. The big concern is whether at all this indicator could say anything about the continuation of the trend.

crazyAtrader · Sep 7, 2011

Channels on the timeframe you are trading.

Anything else is inferior.

Crazy A

kut2k2 · Sep 7, 2011

Quote from Hugin:

Well, trend indicators needs some kind of window over which the trend is calculated.

I totally agree.

Quote from Hugin:

They just state that the trend estimate is calculated for the center point of the interval.

Here's where they lose me. It seems senseless to decide to include an arbitrary point (e.g., the center point) in a linear regression. Frankly I question the whole logic of using a linear regression, given that the vast majority of trends are nonlinear, but maybe that's just me. Fortunately there's more than one way to approach the measurement of trends.