All traders are trend traders :)

But direction is not always a trend.

Add a ZigZag indicator to a chart and see what I mean.

 

Hey Toucan! Before I trade, here’s my quick checklist:

1. Trend Direction: I check if it’s going up or down.
2. Trend Start: I spot where the movement began.
3. Trend Duration: I decide how long I’ll stay based on my trading style.

How do you all prep for your trades?

 

Here is how i define trend trading and the inputs from historical and real time data

My “trends” are defined by my initial stoploss “R”. A trend ends and a new trend begins when price pulls back against the current trend by more than my initial stoploss R.

Offline using historical data and my trend definition, I analyze price action and find the trends with the highest probability of producing profits the next day.

1. Calculate the total number of trends over some time period.
2. Calculate the number of trends over that time period whose length is greater than 2R
3. For those trends greater than 2R, calculate the average trend length
4. Calculate the average percentage of trends greater than 2R

For example:

I trade crude and natty and right now my historical data shows during the time that i trade:

• For crude I know that the average number of trends greater than 2R is 61% and their average length runs 2.9R to 3.9R.
• For natty, I know that the average number of trends greater than 2R is 49% with an average length between 2.9R and 4.1R

I understand that averages are just averages/probabilities and are not guaranteed or the holy grail.


When online and real time trading then use my trend definition above and the historical data to:

1. Analyze market context
2. Determine the trend direction and trade in that direction
3. Find the start of this trend
4. Enter a trade as close to the trend start as possible
5. Manage the trade knowing the average trend length

My goal is to find a trend that meets my trading criteria and capture up to 2.5R profits within that trend.

 

see my reply to "traider" above

thanks for providing what you do
toucan

 

i wrote my own zig zag indicator.

thanks for the input
toucan

 

You are correct, those scalping don't trade trend.

 

%%
Good + good questions;
but unless its inverse[short ETFs profits, i seldom try to guess'' how long a long makes its long profit ''.
An exception, SPY usually sells\SEPT, so it can vary.
[But a counter trend is a trend, +i call a range a sideways trend, so keep it simple + skilled .

 

There are really only 4 ways to trade:

1. Trend
2. Range (ie. mean reversion)
3. Breakout
4. Failed breakout

Everything else is just a variant of one of these.

 

That's all good. You should know all 3 before you even jump into a trade. Obviously, first and foremost, you need to know the current trend in play. But more importantly, you need to know if there's still any life left in the trend, since you don't wanna get in at the top. So detecting both the trend start and trend end is necessary to a successful outcome. And if you know those two, you will have a good sense of how long the duration will be. However, the trend doesn't always move straight up or down. There will be pullbacks along the way. So it's best to consider how many pullbacks you will likely encounter (or how many are still left) in the trend.

 

Good Morning wrbtrader,

Well stated.