Ok, obviously a trend is something that happens a lot. But what is it that happens a lot? In reference to uptrends and downtrends.
On a related note. Trends in fashion or other areas aren't necessarily by their nature something new that's happening a lot but rather they are something that's happening more often, more frequently than in the past and it seems as though many people who see it want to join in it. IOW, it might not already be happening a lot but just that it's increasing in how often it's happening, at such a drastic rate, that it seems obvious it will be happening a lot more in the near future. Although this is a tangent, it's worth exploring also. Along with anything anyone else can think of. It's all good because I will sort it out myself and as always TIA!
An uptrend is a series of higher highs and higher lows. A downtrend is a series of lower highs and lower lows. The word 'series' is used very loosely because imo a single instance of a HH followed by a HL describes an uptrend. YMMV.
If you can accurately estimate (no direct calculation is possible) the Hurst exponent (H) of a (necessarily lengthy) time series, then H > 0.5 indicates the series is more trending than not. H = 1 indicates a perfect trend (up or down doesn't matter). H < 0.5 means the series is more mean-reverting than not. H = 0.5 means a random-walk series (no preference towards trending or mean-reverting).
Choose a horizontal line that matters, choose wisely. Above it bullish, below it bearish. The farther you initiate from this line, the bigger your stop will be. Trends are bullshit, they only exist after the fact.
Whatever your definition is of a trend...it will always be after the fact analysis. Yet, that does not imply you can not profit from a trend if it continues as a trend. Just as important, after you've identified a trend, it does not imply the trend will continue. Trends are usually supported by market events that has nothing to do with technical analysis.
Blowing up a balloon is a good analogy to trend and you will never do it the same. And, at the end of blowing up 100 for your kids party then they become a bitch to blow up.
Hi, I asked a similar question before. Unfortunately, I have not been able to find the perfect solution: http://www.elitetrader.com/et/index.php?threads/how-to-define-a-strong-trend.252172/ Someone told me the following: Trend is your friend, until it ends. Divergence is your best friend, until it bends.
In short, kut is correct. However, an equally or more important consideration is whether or not the "trend" one believes one has defined is tradeable or not. Technically, you won't see the price until the transaction has been completed. Therefore, whatever you see in whatever sort of price display will be "after the fact". This however does not prevent the trader from determining the probability -- if he's done the work -- that price will continue in that direction long enough and to an extent that will enable him to profit. If you are unable to distinguish between up and down, which is after all what trend is all about, you will be severely limited with regard to the options that are open to you.