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ckait

Trend Day Confirmation

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I don't predict but use measured move from a pattern to identify a trend and a length of that trend. Case in point, a breakout from a triangle, I expect it to be a beginning of a trend. If I'm wrong, I get stopped out, end of story. If it is a trend, then I have a length of trend in mind where it would go to. I don't know if it does but I know the probability that it will make it and not make it. This is the best I've seen and learn.

 

NEWBIE-TRADER-ER2-2007-03-21-DOUBLE-BOTTOM-TARGET.gif

 

Let's take today's action and the chart above. I assume everyone agrees that ER2 (and possibly other eminis) are trending yes? I see it trending because it broke out from a double-bottom pattern. From past learned knowledge and experience, the measured move of this trend to go to 825. Will it go higher than 825? I have no idea. I know the higher probability that it goes to 825, after that, I have no stats to back my position so I exit before hitting the target. So I identify the trend early on when it breaks from a major/significant support or resistance level.

 

Now, if it breaks down before reaching 825, I have one clue to let me know that it may not make it and that is when it fails to make a higher high and starts showing a lower low. This tells me to either tighten my stops or just exit all together.

 

I know I'm being verbose but hopefully the message is clear.

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I don't predict but use measured move from a pattern to identify a trend and a length of that trend. Case in point, a breakout from a triangle, I expect it to be a beginning of a trend. If I'm wrong, I get stopped out, end of story. If it is a trend, then I have a length of trend in mind where it would go to. I don't know if it does but I know the probability that it will make it and not make it. This is the best I've seen and learn.

 

NEWBIE-TRADER-ER2-2007-03-21-DOUBLE-BOTTOM-TARGET.gif

 

Let's take today's action and the chart above. I assume everyone agrees that ER2 (and possibly other eminis) are trending yes? I see it trending because it broke out from a double-bottom pattern. From past learned knowledge and experience, the measured move of this trend to go to 825. Will it go higher than 825? I have no idea. I know the higher probability that it goes to 825, after that, I have no stats to back my position so I exit before hitting the target. So I identify the trend early on when it breaks from a major/significant support or resistance level.

 

Now, if it breaks down before reaching 825, I have one clue to let me know that it may not make it and that is when it fails to make a higher high and starts showing a lower low. This tells me to either tighten my stops or just exit all together.

 

I know I'm being verbose but hopefully the message is clear.

 

I totally get what your saying here. I think similar to you too. But when he says the word 'trend day', I think he's referring to those kind of days (bullish for example), where little to no significant pivot lows get violated. The kind of huge range days like the big drop day on the dow. The open and close are close to the extremes of the range. I think this is what he's referring to as a trend day. They don't come that often.

 

There are many days like the one you posted where there are significant trends intra-day, but the day may end up as a doji. I didn't know you were considering these as trend days.

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Bear : we did explain the HOW , just read on previous posts.... you got a be good interpreting the first 15 - 30 min... cheers Walter.

 

Interesting analysis, but it doesn't work for me, for the markets I trade. I always watch the times you say, and the pre-market, but for me market movements start to trend at anytime of the day and end at anytime of the day.

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If you look at the daily and 60min charts on ER2, it looks like a trend day. It may start slow but it did linger and not breach the support it made early in the day (at least I wouldn't take any short this morning, no clear signal at all, up or down). To me, any day where there is no break of support and moves continued higher highs (bullish) is a trend day. Unless we all have a different definition of a trend day, then he'll need to clearly show an example.

 

Charts please, I can't explain without charts and I don't understand concepts without charts. Trying to figure out what IT IS without charts is like blind leading the blind.

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I think what Bear and I are trying to say is that there is no system that accurately predicts trend days vs. non-trend days with any consistency. And if that does exist, coupling that with when to exit the trade makes this a trader's holy grail.

 

Know when we are trending and when we are not. And then knowing when to exit based on the type of day being predicted. You have to be right on both sides of that equation for that work. How many days have we seen where the market moves in one direction (trend) and then reverses (into another trend) OR simply pauses and continues the previous trend? We can all post charts illustrating that, but looking at charts that already happened does not help the argument. There's always a reason why the trend continued or why it stopped in hindsight.

 

Great question and as far as I am concerned, there is no answer to this. And if you got it, you better lock it up tight and make millions off of it.

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I think we got into some wrong semantics here.... when I mean "market climate" I mean understanding (right now)if we are on "cycle" or "trending" conditions... if you cant determine in wich of this two conditions we are at, you got to seriously do some homework... this is a basic skill for any trader... I dont say I got the cristal ball and can tell you all whats gona happen today... NO... I can tell you in this precise moment what "market climate" I am in.... and with this information I can say : I take cycle trades, I take trend trades, I take reversal trades... thats what I mean... now coming back to the thread question... HOW Can I determine a trending day.... we old traders KNOW if today the big boys are working.... and we can smell their dollars flowing on the first half hour and giving MOMENTUM to the market, so we can statistically say, today we are gona have trend moves... now we old traders also detect when the big boys arent there.... first half hour makes me yawn and yawn and yawn.... o my lord this market doesnt start... so here again we can asume statisticaly that we are gona have a congestion small range day... what can happen inside day... many things, we will detect that, per example this days some times are like resurection day... all of a sudden volume comes in and boom trend takes off... but previously on the cycle condition you clearly detected, was the frame for cycle trades... now as market wakes up (example) now we have a frame for trend trades.... you see that is a skill you need to develop.... cant go to the market in such an imposible interpretation... in not that dificult, you need to hear the market, feel it.... its like a river.. can be calm on dry season, goes wild after a big rain on the up hill... if you are closed to understand this fact... lol, you will have to learn it the hard way.... cheers Walter.

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1. If you are asking can a trend be detected the answer is yes. You no not need to wait till the end of the day to know the market is trending. What cannot be known is how long the trend will last.

 

2. ABS((OPEN-CLOSE)/(HIGH-LOW) this is trend % it will tell you how much trend the day (previous) was. 100% would mean the open is on the low or high and the close is on the low or high.

 

the idea being high trend percent days are rare and thus would not likely come is succession. So if yesterday's number was 98%, you would expect a congestion day today.

 

Ensign software has a program that places certain day types on the bottom of the chart. It is based on a four day cycle I believe.

 

**Now, These things are bunk. You can not know if tomorrow or the day three days from now will be trending. Moon phases, planet paths, ocean tides, hemlines, or whatever are a waist of time. Prediction is neither possible nor necessary. Learn to be in the NOW. Learn to trade REALITY.

 

And what is reality? What price IS doing now.

 

How long did it take you today (3/21/07) to figure out the path of least resistance was up? If you need to wait for hindsight chart to see that, you're making trading harder than it needs to be.

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I keep a data of %TREND everyday. Low %TREND tends to be followed by higher %TREND days and vice versa. This is not exact science. BUT anytime we have a %TREND below 15% we are likely to see a %TREND above 40% the following day. If we continue to see a low %TREND two days in a row, the third day has a chance of a %TREND greater than 40% as well. March 5, 2007 had a %TREND of 3.98% on the YM. The folllowing day the %TREND was 55.09%.

 

Couple examples:

 

2/28/07: 12.89%

3/1/07: 42.54%

2/14/07: 9.71%

2/15/07: 27.91%

2/16/07: 44.83%

 

2/06/07: 1.82%

2/7/07: 6.67%

2/8/07: 5.71%

2/9/07: 45.45%

2/12/07: 42.25%

2/13/07: 62.14%

1/29/07: 1.23%

1/30/07: 60.66%

 

1/16/07: 19.35%

1/17/07: 40.30%

 

Identifying trend vs range is a concept market profile focuses strongly on. It takes into account two brackets: value low to value high and previous day low to previous day high.

 

Where there is balance between buyers and sellers, the markets will remain in equilibrium and a rangebound market. This is represnted by price traveling within the value area. When one side shows more confidence an imbalance occurs in supply vs demand. Thus, there is one sided domination forcing price to leave value and find a new level of equilibrium. An imbalance in supply vs demand causes the markets to trend. This can be seen by one-timing auctions on a 15minute or 30minute chart for example. One-timing meaning that the markets never trade below the low of the previous 15min or 30min bar and continues to make new highs.

 

You may say, "Okay.... if the markets are one-timing the first 90minutes, cant it still reverse?" Yes it can. But like I mentioned earlier the previous days range is extremely important to me to judge a trend vs range. When the markets break out of the previous days high AND finds price acceptance, it will either trend upwards or find equilibrium right above the previous day high. So what you will see is a opening hour breakout and then rangebound the rest of the day. But this can clearly be detected early in the trading session as volume dissapears within 30-60mins.

 

When price breaks out of the previous days high and finds price acceptance and volume remains active, we are likely to trend in the direction of the breakout.

 

In real-time... I do rely on the tape alot to watch for the flow of tape and price action. 30minute charts help me see a potential trend day if I am unable to spot it early. Previous day high/low must be violated for a trend to occur in my trading. There are a few things that I have trouble explaining it in words... but I do get this "feel" that a trend day may develop during the first 15minutes. Its a different atmosphere in the markets at the open on trend days. For those using pit noise, a full pit also helps confirm this.

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In the final analysis, you CANNOT predict what price will do, no one can. We have to calculate scenarios in probabilities, experience, etc. What happens after the FOMC report is unpredictable, it could have gone the other way. If you want to predict, sports betting might be a better option, not stock markets.

 

Best is to use stops and targets to find your edge (increase your risk/reward), that's the best weapon. If you think you spot a trend, go with it, and set your targets and stops.

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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?

 

Hi ckait,

 

To properly analyze trend days, you need to break them down into designated categories for study.

 

For example, one particular trend day occurs after several days of contracting volatility as dalby suggested.

 

However, contracting volatility all by itself doesn't tell you which direction the strong trend day will occur (up or down)...stick to your trading plan and hope it puts you on the right side of the tracks.

 

There's another type of trend day related to market seasonal tendencies (cycles) and these occur with high probability that can involve one particular trading day of the year or several trading days of the year as a group.

 

For example, the S&P 500 has risen higher on average by +31 points between Oct 27th - mid-November for each year since 1990 (except 1994 and 2000) with some years like last year rising much higher beyond mid-November (several strong trend days during this duration).

 

In this particular situation, you actually know which direction the market will go and the above data is easily verifiable.

 

There's another type of trend day that occurs as a reaction to specific key market events.

 

For example, the week of a Quadruple Witching will produce with high probability a trend day on either the Mon, Tues or Weds of the Quadruple Witching week.

 

However, Quadruple Witching week all by itself doesn't tell you which direction the strong trend day will occur (up or down)...stick to your trading plan and hope it puts you on the right side of the tracks.

 

Now, for those trading days you know when a trend day will occur (as mentioned above) but you don't know which direction...

 

You need to know what type of price action will tend to start a trend day.

 

Then, even if you miss that early signal into a trend day, you need to recognize your trading within an establish trend day.

 

Therefore, your going to need to have two different trade strategies...

 

One design for the early part of a trend and the other designed within an established trend...

 

Trend Reversal and Trend Continuation signals.

 

Also, I didn't say Counter-Trend signals and these are different in comparison to Trend Reversal signals.

 

Trend Reversal pattern signals recognize a shift in supply/demand.

 

Counter-Trend Signals are pattern signals when there is no shift in supply/demand.

 

My point with all the above, there are some trading days in the year where you know specifically when there will be a trend day.

 

There are other trading days (not many) of the year where you know specifically which direction that trend will go.

 

Simply, I'm not going to become rich especially since most trading days are not trend days but I will make some good dough via trend days associated with market seasonal tendencies (I only mentioned one above), key market events (I only mentioned one above), volatility analysis (I mentioned one above) et cetera...

 

All of which helps with position size managment (knowing when to increase your size and when to decrease your size).

 

Yep, I do load the boat on some of these trend days while still not violating my risk (money) management rules.

 

However, if I was single and didn't have a family to support...I would do more than just load the boat.

 

Therefore, you can predict with high probability which day will be a trend day and which direction it will go for some trading days out of the year.

 

Mark

(a.k.a. NihabaAshi) Japanese Candlestick term

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Soul : I would love if you could teach us , maybe on other new thread how you keep (calculate) this %trend data... I believe you have very powerfull statistic there... thanks in advance cheers Walter.

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If one need to get some basic idea about the trending nature that is being exhibited by the price action of a given stock, then which particular indicator and indicator values should one be looking at ?

 

Suppose we use ADX to begin with, then can we just use ADX > 25 = Trending and ADX < 25 = Non Trending ?

 

Same way for other Indicators like ROC, Momentum, TSI etc.

 

Are there any agreed values for these indicators which indicates a trending vs choppy market state for that instrument in that particular time frame ?

 

Please express your views.

 

Thanks

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