Establishing a trend

Discussion in 'Trading' started by Kiwiboy, Nov 25, 2003.

  1. dbphoenix


    Today's a good example of the point I was trying to make above.

    Technically, there was no trend in place until we made a lower high and a lower low. Whether or not you can find one depends on the bar interval you choose, but a 5m chart will show both.

    So, did the trend "begin" at 1448? No, it didn't, though the "seed" for the trend was there due to the fact that the PDH was important (as was the PDH for the ES), that there was also a pivot level there, and that we haven't reached the ADR for several days. Therefore, a short at the first sign of weakness becomes a higher-probability entry than just jumping in because you feel the price is "too high", even though it is a counter-trend entry.

    As for the trend itself, the marubozus are good signals or keys or indications that a trend is likely to manifest itself, particularly since price couldn't make it back more than halfway through the bar, making an MA an appropriate stop.

    On a day like this, tho, one is justified in getting to BE and just leaving it the hell alone since the probabilities are for a trend day. If the trend day doesn't materialize, he will at least get something out of it. If it does, he will capture most of the move.

    This is, of course, assuming all-in-all-out. If trading multiple contracts with varying tactics, there are many more options for managing the trade.
    #31     Dec 3, 2003

  2. I think my conformation of trend, is the same as your beginning of trend, if I understand you correctly.
    When you are doing back test on something to do with trends, do you begin at the test of the reversal point? For instance, say your measuring the average length of trends, do you start at the TEST or the REVERSAL point?

    "the marubozus are good signals or keys or indications that a trend is likely to manifest itself,"

    I've been looking around for a reference on "marubozus" and haven't been to find any, could you give a brief description on what it looks like? ( Body compared to tail or what ever)

    "since the probabilities are for a trend day."

    How do you define a trend day?
    I have trouble defining a trend day for myself, but if I could it would make keeping the right stats much easier.


    #32     Dec 3, 2003
  3. dbphoenix


    I can't say since I've never backtested anything concerning trends per se other than stop placement. I haven't looked at the average length of trends, either. I'm more concerned with momentum and S/R than length.

    Edit: the above isn't exactly true. While I haven't done any formal backtesting of trends, I traded trends and retracements in trends since I first started trading stocks, but whatever I learned in the process was empirical (except, of course, for what I learned from Wyckoff and Sperandeo). In other words, whatever "testing" I did was casual, in the sense of testing or verifying an observation.

    When I started trading futures, however, I learned that it's next to impossible to trade trends effectively without a solid footing in reversal mechanisms. Otherwise, I'd end up at BE most days, since I daytrade.

    Hope this is a clearer answer.

    A marubozu is a relatively long candle whose high/low is equal (or nearly so) to its close, i.e., little or no shadow.

    The open is at or near the high/low of the day and the close is at or near the opposite, though there has to be an actual trend, i.e., it can't just base for six hours.
    #33     Dec 3, 2003
  4. on 85% of days there is no trend on 5min SP. what do u do then? eh?
    #34     Dec 3, 2003
  5. Digs


    USe VIDYA moving average.

    Search for example of code...

    Best moving average for trend identification
    #35     Dec 3, 2003
  6. dbphoenix


    There's always a trend in some time frame. However, the given trend length may not be sufficient to enable one to make a profit, depending on his stop placement and his price targets.

    Which is why I said that it's difficult to make the most out of trend-trading these days unless one also has a reversal strategy. But reversals weren't the subject of Kiwi's question.
    #36     Dec 3, 2003
  7. funky


    if you are talking about a day where the 5min starts a new trend sometime in the morning then yes, you are probably right. but most days are started from a trend the day before.

    try taking a look at the trend into the beginning of the session and find a good entry point into that existing trend. my favorite is when the opening price is a double bottom/top (the end) of yesterday's trend. another easy entry is when a gap pulls back into the 20 sma of the existing trend. you can find many ways to synch yourself up, but definitely don't take each morning as a new market waiting to establish a trend -- it's usually already there!!!

    #37     Dec 4, 2003
  8. Nice job funky,
    Another fairly safe entry point that I found, is when a multi day trend line, a P/S/R line, and price, all lines up at the same time.
    #38     Dec 4, 2003
  9. dbphoenix


    Such as yesterday, when the ES hit its supply line at 1074.
    #39     Dec 4, 2003
  10. funky


    today we opened up on the daily 5 sma....easy stuff :) up we go!
    #40     Dec 4, 2003