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ckait

Trend Day Confirmation

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How does one determine trend day , other than sitting and watching one happen? Are there clear signs or lack of signs that will let you know early enough to keep you from getting in your own way?

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there is no "exact" answer. but here are some hints

 

first of all, trend days are more likely to occur after volatility has contracted. with that in mind

 

1) ticks almost entirely above or below zero line

2) almost all, or all sectors strong bullish or bearish

3) large gap up/down with confirmation in breadth

4) price moves in direction of trend with strong confirming volume and pulls back with lighter volume

5) no, or minimal pullbacks in price after tick extremes

6) price blows through resistance levels without even a hiccup

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That is the million dollar question. With the answer to this question, you could become a multi, multi-millionaire rather quickly. Since this is not realistic, I think it goes to show that no one knows the answer to this (and probably never will).

 

Some argue based on indicators, price action, etc. and I personally believe there is no answer. You don't know you are in a trend till 4:15pm EST. Until then, it's anyone's guess!

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i totally disagree. i think this is a big part of my methodology. recognizing the character of the market, and how it is developing (trend or rotation).

 

nothing is 100% and nobody has a crystal ball, but i absolutely believe that you can have an edge and part of the edge comes from recognizing market development and that includes on an intraday basis

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ckait : I like to see the overnight globex range being broken on the first 15 min with nice decent volume an see my dom crazy.... that means we are gona party today right on the begining.... if you get a lazy zzzzzzz first 15 min THEN it doesnt mean we are not gona have trending day.... it means first we are gona have a super coil.... maybe hour two hours and then at the break you want to pay attention... that was todays case... and the last is the days with news... sometimes market waits for the news in an erratic fashion and the news ( not always, depends what type of news and output of numbers ) bum trending starts.... after lots screentime this is an expontaneous reading.... but something more or less like is is how this works... cheers Walter.

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That is the million dollar question. With the answer to this question, you could become a multi, multi-millionaire rather quickly. Since this is not realistic, I think it goes to show that no one knows the answer to this (and probably never will).

 

Some argue based on indicators, price action, etc. and I personally believe there is no answer. You don't know you are in a trend till 4:15pm EST. Until then, it's anyone's guess!

 

 

Brown : there are very easy methods to know if today there are big institutional orders.... (wich is the only way market can trend) volume, speed, dynamics, internals, etc... you can clearly see when the big boys are anxios to position them selfs in the market... it takes experience... but its posible... no doubt...

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i think this is a big part of my methodology. recognizing the character of the market, and how it is developing (trend or rotation).

 

So what you are saying is that you know when, or relativley confident, when to implement a range bound strategy (eg any oscialltor) and when to stop that strategy and implement a trend following strategy (eg moving averages) ? If you can, more power to you. But I find that hard to believe.

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i don't use oscillators (or lagging indicators in general) but yes i am RELATIVELY confident within the first hour if it is more of a trend or a range day. it's not rocket science, and there is not 100% accuracy. but i think its an important part of trading

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Then I take it you watch the first hour, if its going to be a trend day you place your trade and then sometime later when the trend is over you get out(if you know when it is going to start you should know when it is going to end). If it is not going to be a trend day you do not place any trades. Why worry about the range bound days if you know when it is going to trend? You can make more money in a trend vs chop day any way.

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i trade (futures) for income

thus i try to make money every day.

 

rangebound days are EMINENTLY tradeable. i love them. i trade them because they make money

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trader273: market has "climates" like rainy or sunny days.... you as a trader may develop strategies to trade on rainy days (cycle days) or sunny days (trending days).... so if you have the habilty to determine what kind of day you are at, then you can choose wich strategy will fit best for that day... now trending days doesnt mean you are going to hold into a position all day....(as you wrote) it means maybe its not a good day to be contrarian as sweet happenns on a cycle day.... you may want to buy dips or sell rallys on trending days... you see, there is a great arsenal of tools to understand just "market climate" it has nothing to do with timing your trades... its just climate analisis.... on the other hand you must have another set of tools for your timing... already stated for the apropiate climate.... trading has diferent areas of analisis that coexist simultaneously... thats why so many people struggle on this bussiness, they are only one area of analisis and they lack some big basic aerial views of where they are situated.... hope this helps cheers Walter.

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yes, i agree.

 

the main rule on trend days is that IF i trade "countertrend" i trade smaller size and smaller targets.

 

and concentrate on buying pullbacks etc. type of plays vs. the fade type of plays that make up the bulk of most trading days

 

so called "trendless" or "rangebound" days are excellent for fading

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Thanks for all the input. I figured I'd get a wide range of answers from a question like that, I guess the best answer would be in the observation of your trades for the period and weather your original convictions play out.One thing I have learned is not to have too much pride to exit a trade when it is not going your way before your stopped out.

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That is the million dollar question. With the answer to this question, you could become a multi, multi-millionaire rather quickly. Since this is not realistic, I think it goes to show that no one knows the answer to this (and probably never will).

 

Some argue based on indicators, price action, etc. and I personally believe there is no answer. You don't know you are in a trend till 4:15pm EST. Until then, it's anyone's guess!

 

I agree with brown on this one. It's impossible for me to know what the day will bring. It's easy for me to say, hey this was a trend day, and all my trades worked out wonderfully. Look at this perfect trend day and look at these perfect setups.

 

It's like the guy patting himself on the back after the fact. It's very easy to say anything after the fact. And, we only know it was a trend day until after the close.

 

How many trend days have you gone through where you traded but didn't load up? It happens to me all the time.

 

I never know how a day is going to turn out...at least this is in the markets that I trade. Markets routinely trend in the morning nicely and turn into slop later. Or slop early then trend later. Days that trend the entire day just happen to be a one of those days.

 

If people are able to predict it, then all the power to them. I'm unable to.

 

So to answer the original question, how do I determine if it was a trend day? At the end of the day I'll look at the technicals and say "this was a nice trend day"....or i'll say "this days was ugly as hell".

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Then I take it you watch the first hour, if its going to be a trend day you place your trade and then sometime later when the trend is over you get out(if you know when it is going to start you should know when it is going to end). If it is not going to be a trend day you do not place any trades. Why worry about the range bound days if you know when it is going to trend? You can make more money in a trend vs chop day any way.

 

Exactly, you said it. If it were possible to predict the trend days, then you could just wait for those days then max out the margin in your account right up to the red line.

 

Easy in theory, but impossible to implement in real life.

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That is the million dollar question. With the answer to this question, you could become a multi, multi-millionaire rather quickly. Since this is not realistic, I think it goes to show that no one knows the answer to this (and probably never will).

 

Some argue based on indicators, price action, etc. and I personally believe there is no answer. You don't know you are in a trend till 4:15pm EST. Until then, it's anyone's guess!

 

I have to disagree on this one (No not because you like the browns LOL). :)

 

Technically speaking an up trend can be defined as when a market is making higher highs and higher lows.

 

A down trend would be when the market is making lower lows and lower highs.

 

It is therefore possible to see that a trend is in place during the day. More correctly, during the trend itself.

 

The magnitude cannot be known before hand or even during, but the fact that the a trend is in place can. The end and the beginning of the trend cannot be known either (although we can see shifts in supply/demand dynamics and candle patterns taking place in the present).

 

More specifically, there are clues that can be picked up in price action itself that can alert the trader that price is trending. i.e. wide spread bars with ultra high volume or WRBs or bars that close closer to the high of the bar (up trend) or low (down trend). Long Shadows or even the amount of white candles (close>open) than dark candles (close<open).

 

Picking tops and bottoms is much more precarious, but picking trend itself is much less so.

 

Now, if you want to know tomorrow's trend today (as a short term day trader), well see Brownsfan's post........... :D

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PP nailed it. You have to look for these to define trends and ranges. Pivots are your best clues to know what the market is doing. This the same reason buying pullbacks and selling rallies are the best and safest entries you can make by riding whichever the wind blows. The chart below should give you an idea what they look like. Ranges happen when there are no higher highs or lower lows, they just make to the same pivot level and reverse. This is price action, this is where the payoff comes when you learn to recognize. Indicators are lagging so by the time it happens, the trend has been clearly moving. Internals are fine if you trade in micro-timeframes. This price action applies to all timeframes. Start from largest and work your way down. Define the trend in the one timeframe larger than the timeframe you plan to trade, that will be your guide.

 

newbie-trader-example-trends-higher-high-higher-low-lower-high-lower-low.gif

 

higher-highslows-lower-highslows-example.gif

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Here is my input on what I watch for trend vs range days. First the previous day high/low. Price needs to break this range in order for me to determine whether we will trend or not. If price is contained within the previous days range, we have a rangebound day. (not unless we have a wide range of over 200+. This is not the norm) So early at the open, I will check to see where price is trading in relation to the previous day high/low. Second, I watch tape during the opening 30min or so to determine whether the big boys are playing or not. The markets will not trend intraday without big money. Third, I watch for premarket action. If there is enough volume premarket on the SSF's with heavy trading on the index futures, this alerts me that we may seem good movement in price during the trading session.

 

Of course as the day starts, understanding TICK's will help determine the strength of the markets. Volume and price analysis will work too but I find it important to be able to determine a trend vs range early in the session.

 

The times I have most difficulty with trend days is when price creeps up on low volume. Now this gets me everytime. :mad:

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Different strokes for different folks I suppose.

 

Again, if ANY of these theories worked in real-time, you would be a multi, multi-millionaire with very little risk, aggravation, etc. Of course it's not 100%, but if you can bat 70%+ on your theory, then your account should reflect that.

 

Knowing if we are in a trend or not within the first hour is the holy grail as far as I am concerned. You can ride out the entire day just watching your P&L skyrocket.

 

And of course - knowing that we are in a trend or not is just ONE part of the equation. The next part is when to exit... But I suppose if you know when we are trending you will know when the trend is over vs. a brief rest or pullback.

 

As The Bear said - it's very easy in hindsight to look at a chart and see a trend. Anyone can do that. Performing the same analysis in real-time and executing according to that analysis is the difference.

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lol Brown... but I got a nice lifestyle... I repeat, it is possible, its about wisdom, faith and experience... market its like women... you have to live with one to real understand how they think.... cheers Walter.

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lol Brown... but I got a nice lifestyle... I repeat, it is possible, its about wisdom, faith and experience... market its like women... you have to live with one to real understand how they think.... cheers Walter.

 

I couldn't agree more which is why I am saying that I am saying - there is no bullet proof way to know if you are trending or not.

 

Just like a woman - you have no idea what you are going to get sometimes... Just when you think you have it pegged, you are quickly reminded that you can be wrong rather quickly.

 

;)

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Brown : epistemologically "bullet proof" would be wrong to say... no trader can tell 100% the market climate... but for example in this very moment march 21 12:35 est what is the market climate... you can ask my doughter, she is 11 years old and will tell you : "papi el mercado esta muerto" ("daddy market is dead") so.... we are on cycle conditions... you see, there are reasons, big boys are not there... they are waiting fed numbers... so that gave me today a couple of cycle trades and made me almost three argentinean standard salaries... thats what we refer to "market climate"... in an hour and a half we will have a diferent climate.... probably trending.... so if I go with my cycle trade... I will get mowed... what can I do then... trade trend trades, buy bips, sell rallys.... just common sense Brown, and experience... cheers Walter.

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......And of course - knowing that we are in a trend or not is just ONE part of the equation. The next part is when to exit... But I suppose if you know when we are trending you will know when the trend is over vs. a brief rest or pullback.

 

The two are mutually exclusive. That is, it is possible to know that we are trending and NOT know when it will end.

 

Many people buy tops and sell bottoms because they recognize trend but cannot "predict" the end of the trend. BTW, Prediction is not neccassary, but that's a discussion for another thread.

 

If the market is making higher Pivot or Swing highs and making higher Pivot or Swing lows, the trend is UP. The magnitude in price and time cannot be known but the trend itself can be defined.

 

If trader x buys just as the market retraces, well timing and trade management come into play, not trend definition.

 

How did you do on the Last big sell off in Feb? I suspect you did well. Why? Because pretty early on you realized being a seller for the day made more profit sense. In short, you knew the trend/momentum was down and you did not want to fight it.

 

I know you use candle patterns particularly reversal signals. But you also have said that reversal signals should be taken when there is a trend to reverse. Hence you must therefore be able to detect trend. Did I read this wrong?

 

I would say the first hour stuff only sets a bias that can on can not be true. However, what price actually does-higher high during the day tells what the trend is. And that can be seen on a chart.

 

Lastly, Known the trend and creating a profitable strategy do not go hand in hand. Knowledge of the trend direction does not solve all the psychological issues involved in trading. You can see trend and still not have a "trader's mind". Thus, just because you know the trend does not mean your P&L goes thru the roof.

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Brown : epistemologically "bullet proof" would be wrong to say... no trader can tell 100% the market climate... but for example in this very moment march 21 12:35 est what is the market climate... you can ask my doughter, she is 11 years old and will tell you : "papi el mercado esta muerto" ("daddy market is dead") so.... we are on cycle conditions... you see, there are reasons, big boys are not there... they are waiting fed numbers... so that gave me today a couple of cycle trades and made me almost three argentinean standard salaries... thats what we refer to "market climate"... in an hour and a half we will have a diferent climate.... probably trending.... so if I go with my cycle trade... I will get mowed... what can I do then... trade trend trades, buy bips, sell rallys.... just common sense Brown, and experience... cheers Walter.

 

I still don't see what this has to do with his original question. What he said was How, if possible, can one predict a trend day before the day completes. What you said here was like my previous post. A guy looking at his charts, patting himself on the back because he had a profit day AFTER THE FACT. Any after the fact thinking has absolutely nothing to do with what he asks.

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>The two are mutually exclusive. That is, it is possible to know that we are >trending and NOT know when it will end.

 

I think we should re-word it guys. It's possible to know that we WERE trending.

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