nicely said, illiquid. the public is the primary force in "trend trading" since it is near impossible for them do anything else. surfer
Longer time frame: determine the trend: - higher highs AND higher lows = up trend => enter only long - lower lows AND lower highs = down trend => enter only short Intermediate time frame: determine the position in the current trend - middle trend: continue: hold if you're in, stay out if you're out; adjust your stops - watch for end of trend / beginning of new trend - watch volume Smaller time frame: monitor it for a better entry / reversal. - calculate your stops, risk reward/risk, position size - watch volume Watch channels, watch volume, use a minimum of indicators for confirmation.
Yep, see it coming, set your orders, get filled, set a STOP, you are good to go. Get a small profit, move STOP to cover costs (the whole position, forget the nonsense of 1/2 here 1/2 there). Now you have a free trade to play with. A decent trader in an instrument like the ES can/should get 80% of trade starts like this because he/she only takes "QUALITY" trades in the first place. This is trend trading in a nutshell.......... This is the easy part, the harder part is hanging with the ride, that comes with experience and nothing else. Exits on profits are to be only when you see a clear sign of a reversal. GET OUT, if it turns out to be just a retrace then decide if you want to call it a day or if you want to reenter. ENJOY the rides.......A sweet game this all is.....
Glad to see all the responses. And that everyone knows (mostly ) what a trend is. I did not think about how to define the trend as I didnt think it mattered too much. I was just thinking (as an example) if your time stop on the trades was 5 days, than use the trend that the 50day MA shows. Or something simple like that. I am curious as to anyone's thoughts on how much do your odds improve when trading with the trend . Obviously there will be some correlation between the strength of the trend and the odds. But I simply do not have any idea of the magnitude. If I made 1,000 trades (with a 5 day holding limit each) with the respective trend of each stock. Would I have 600 winners? 700? 750?
If it was really REALLY important to you, you could create software (or pay somebody to create software) that did the following: 1. Define an "Uptrend" to be "times when the 10 day Moving average is above the 80 day moving average". Define a "Downtrend" to be "times when the 10 day MA is below the 80 day MA". 2. Write software that calculates the average daily price change (measured close-to-close) during "Uptrends", and calculates it again during "Downtrends", and calculates it a third time for all days (both uptrend days and downtrend days). 3. Compare the average daily price change during Uptrends, versus the average price change for all days. You expect/hope that price change is significantly more positive during uptrends. 4. Compare the average daily price change during Downtrends, versus the average daily price change for all days. You expect/hope that price change is significantly more negative during downtrends. 5. Compare the Uptrend average change, versus the Downtrend average change. You hope/expect that Uptrend change is quite a lot bigger than Downtrend change. 6. If you wish, do the whole analysis again but keep track of "% of up days" rather than average price change. You hope/expect that during uptrends, much more than 50% of days are up days. Similarly during downtrends, you hope/expect that much more than 50% of days are down days. 7. If you wish, do the whole analysis again but use a different definition of "Uptrend/Downtrend" rather than 10/80 moving averages. I recommend the Bollinger Oscillator, %B, as another good candidate.
It is so wonderful to see all of these different people defining a trend in so many different ways . . . makes my heart quiver to see traders using the old grey matter.
RunTrade Excellent topic. I use WMAs & Long period Stochastics to define trend. I use the longer term trend for context ie take buy signals only in an uptrend and sell signals only in a downtrends.. There are a few charts & comments at: http://eagletrader.blogspot.com/ Specifically at: http://eagletrader.blogspot.com/2006/01/follow-system-dont-be-clever.html http://eagletrader.blogspot.com/2006/01/classic-multi-timeframe-analysis.html Happy to elaborate further if there is interest.. Best
Eagle, Thank you for the compliment. There are too few of them around ET. The whole reason I bring this topic up is that is what my trading strategy is based on. I use the strongest trends (under my intricate definition) and enter with them. I realize that there is a better chance of profiting over losing because of the trend....but, the question remains...how much better RT PS: good links eagle.