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Trend Following-Trend Commandments

Discussion in 'Events' started by Trend Following, Jun 22, 2011.

atticus
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So incredibly FOS.

#491 Aug 24, 2012

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oilfxpro
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Quote from Tango 6 Alpha:

I'm sorry I missed this one!

The title of the thread had a catchy ring to it (Trend Commandments) that was to irresistible to ignore. Obviously, created by a creative mind. Unfortunately, had I been here when this thread kicked-off, I would have had to play the role of contrarian.

The question was asked by someone in this thread long ago: Can anyone give a definition to the trend?

The answer is a resounding yes. People often times provide their own definitions for things that have no physical extension into the universe in which we live. The mere fact that one can provide their definition, does not give existence to the thing they define. Therefore, the technical (mathematical) answer to the question is all at once a resounding no.

Market Trends, in fact, do not exist. What's more - they never have existed. They are a figment of the observers imagination. No more real than the Tooth Fairy. Yet, that does not stop the belief in the Tooth Fairy, from impacting the lives of millions of little children on an annual basis. Likewise, the irrational and illogical belief that one can actually "trade the trend," becomes self fulfilling prophecy in the markets on a daily basis, and is the causation that has significant meaning for all traders within all time frames. This recalcitrant irony is one of the wonders of the world, as far as I am concern.

Now, to the matter of trends.

The question of whether or not the trend exists, goes much deeper than the superficial definitions easily given by simply looking at a chart, observing the historical price and making a declaration about the "trend" based solely upon the path that price took to arrive at its present level. This is and always has been the accepted norm for determining not only whether the trend exists, but its direction as well. However, a closer examination of the logical characteristics of price and of the existence of Time itself, will reveal that while history does like to repeat itself, that path it takes to its repetitious behavior indeed has nothing whatsoever to do with trends.

Case in point. The conventional trend is defined by selecting a directional path for price, that is established with the linear relationship between multiple price points through history, for 'X' number of bars of data. A linear line is then drawn connecting the Present price point, to some price point in the Past.

All other relative price points found inside each bar of data (OHLC) between the Present and the Past, are excluded from the equation and thus deemed marginally important at best for the purpose of providing a linear definition for the trend. Historically, this has always been the classic manner in which the trend's existence was defined, quantified and measured. And, it has been from such information that traders since the down of price charts, have been making entry and exist decisions with respect to their position in the market.

This trader's behavior is hallucinogenic to the core.

The trader hallucinate that a linear regressive relationship in the historical price, is in fact something that can be traded in the Present and continued in the Future. The fact that the market helps the trader to become even more hallucinogenic, by often times rewarding the trader for taking a position based on this irrational assumption, is nothing short of a cruelty defined. Downright evil in some instances. Yes, the market can be evil at times and its feigning of the existence of trends, is one of hits hallmark evil traits. So, why is this market behavior so cruel?

Go back to the historically accepted definition of a trend given above an recall what was left out of the equation: the internal price points between the both the Past and the Present price points that were used to both define and quantify the trend. These internal OHLC price points, had they also been used in the calculation, would have nullified the possibility of there ever being a linear definition for the trend that was mathematically possible. Boom! Just like that, you eliminate the existence of the Linear Trend without even breaking a sweat.

Now, rest assured that this reality is not merely some kind of mathematical street magic. Its simply a mathematical fact born of the logical relationship between that which is Linear and that which is Non-Linear. So, mathematically - in any market that contains historical OHLC, there can NEVER be any rational definition of a Trend. Period.

Ok, so much for the math theory - let's get down to the physics of trends shall we. Recall, that above I implied that "Time" had something to do with "trends." Well, its true. But, you are going to have to hold on to your hat for just a moment as this ride might get a little unfamiliar to some.

The question is whether or not trends actually exist. My answer is absolutely not, trends do not exist. However, my extended answer is not merely that my opinion is that they do not exist, but rather that it is physically impossible to declare that a trader could actually trade a trend. You'll have to bear with me on this.

In order for the trade to trade something, that thing must have a point of instantiation in reality. That simply means that the trend must have some kind of tangible existence that can quantified, or measured. Else, the trader is simply making it up in their own mind (which is a well understood and highly used practice among many traders in all markets). If the trend does not exist, the trader cannot trade it.

Looking back at our historically accepted example once again, we come to the realization that at some point, the trader has not only make a determination about where the trend resides, but what direction the trend is pointing. Well, THAT is the problem. The problem is two fold:

A) The trend has no possible way of extending itself beyond the current bar of data (the Present).

B) In order to trade the trend, the trend must exist.

There is a huge problem here for so-called Trend Traders. That problem is not only mathematical and philosophical, but it is also a very difficult logical and physical problem, neither of which have any real good potential for a solution.

The "trend" must (by definition) be composed of events that have already had their respective points of instantiation. The instantiation of any market event comes with a time stamp that marks it place in history, and locks it down as something that can never be altered or changed.

The most important aspect here, is that the market event must exist somewhere in history. And, while individual historical price points (bars of data) may indeed be linked together linearly across Time, there are no such linkages physically possible in the current bar of data, as the physical component of price cannot be extend beyond the Present. Thus, if you remove "Time" from the equation, all prices collapse into a singular vertical dimension with no horizontal expansion through history. Thus, once again, no Linear Trend is possible.

So, what is possible?

Re-introduce "Time" and you can clearly see that the only possible thing the trader can ever trade is: The Time Based Trend Projection and NEVER (ever) the trend itself.

The only price related vectors that truly exist in the market are called: Trajectories. Trajectories are a much more comprehensive method for determining the true nature of price stability relative to its Direction. Trajectories also uncover and reveal information previously hidden from market observers about the true nature of the Magnitude of price. Trajectories are also very useful in providing previously hidden information about the Timing of price action. And, lastly, trajectories are most notably significant for their ability to dynamically identify the structure of price behavior over time.

With this understanding, the trader has a much broader and far deeper understanding of price behavior and the structure of price that contains such behavior. And, with that knowledge, the trade can make far more precise measurements on the Future location of price within its own structure.

I hope this has been somewhat helpful, especially to the new traders out there who are just beginning to dig into and study the nature of price.

Until next time!

StealthTrader
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+1

My question is what happens to all those trends on 1 minute or tick charts that fizzle out as random transactions as opposed to real trends .If each instrument has only 2 to 3 large moves , what happens to all the little trends on lower time frames?Do so many trends fail as opposed to the very few that do materialise?By the time you see a trend , they reverse 80 % of the time.
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#492 Aug 24, 2012

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atticus
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Quote from Tango 6 Alpha:

What part do you disagree with? The mathematical reality that trends can't be traded, the logical implication that trends can't be traded, or the physical evidence that trends have zero ability to exist beyond Bar[0]?

I would LOVE to have this conversation with you [lol!]

You can run, but you cannot hide.
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There is less math in your posts than my son's third-grade homework.

#493 Aug 24, 2012

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oilfxpro
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Quote from atticus:

There is less math in your posts than my son's third-grade homework.
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At least he can make a reasoned post , rather than attack with childish humour.

WTF is a trend ?Do you really know?

A trend can make a single move in a straight line , occasionally trends make a move within seconds without retracements and peaks and troughs , or they can make a move with lower highs and lower lows for down trends , or they can make a move vice versa.

#494 Aug 24, 2012

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oilfxpro
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Quote from oilfxpro:

At least he can make a reasoned post , rather than attack with childish humour.wtf is your age?

WTF is a trend ?Do you really know?

A trend can make a single move in a straight line , occasionally trends make a move within seconds without retracements and peaks and troughs , or they can make a move with lower highs and lower lows for down trends , or they can make a move vice versa.
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#495 Aug 24, 2012

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atticus
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Quote from oilfxpro:

At least he can make a reasoned post , rather than attack with childish humour.

WTF is a trend ?Do you really know?

A trend can make a single move in a straight line , occasionally trends make a move within seconds without retracements and peaks and troughs , or they can make a move with lower highs and lower lows for down trends , or they can make a move vice versa.
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Recall your nadex thread?

#496 Aug 24, 2012

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oilfxpro
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Quote from Tango 6 Alpha:

Exactly! Which is more proof that using trend language is yesterdays news. A much more precise way to measure price behavior in the lower time frames, is through the lens of the Trajectory.

This concept has tremendous implications, because it opens up a whole new realm of statistical analysis of price, that never existed before AND that "trends" themselves are simple unable to define.

Keep in mind, I only use the word "trend," because it is so pervasive throughout the trading community. If I were to only use the word Trajectory, I would lose contact with the reader almost immediately. I understand the concept and the belief behind "trend think," but I have come to realize that they simply do not exist the way that most traders have been taught.

They simply cannot be used for describing price behavior at the lower time frames, because the moment you attempt to apply a mathematical model for describing "trends" at that level, you are forced to admit that they have little to no value in predicting the "next move" at the larger time frame. Therefore, the trader needs a new (different) way of describing the behavior of price, that finally unifies both the lower and the higher time frames.

Its called the Trajectory Unification Theory (TUT). I have several models and have not yet decided on which one I want to make known to the public at this time, FWIW.

That's because they never existed in the first place. That which truly exists, simply cannot disappear, or cease to exist. What you are describing are the vector transformations of price, occurring at lower time frames as the higher order trajectories evolve into a particular direction, based on the volume of buying and selling pressure. So, what we see at the lower time frames is the continual changing of directional volatility, which causes the appearance of rapid "trend change" in the lower time frames.

I call this phenomenon, Distinct Vega. Distinct Vega, is another Delta Class indicator that takes the TCD (Transequential Contiguous Delta) concept to the next logical level. The delta calculation for DV is extremely simple.

Distinct Vega has four (4) dimensions:

Distinct Vega Leading Long = Bar[0] High - Bar[0] Open
Distinct Vega Trailing Long = Bar[0] Close - Bar[0] Open
Distinct Vega Leading Short = Bar[0] Open - Bar[0] Low
Distinct Vega Trailing Short = Bar[0] High - Bar[0] Close

This volatility indicator with its four (4) primary outputs is applied to every bar of data across all time frames. Each dimension is a Trajectory.

When you combine the two (2) primary Trajectories of TCD, with the four (4) primary Trajectories of DV, you derive six (6) new dimensions of price action, that can then be used in a multitude of custom algorithms for determining future price behavior.

Again, the Historical Trend Trader is completely blindsided by this. They can't see it and therefore, they cannot account for it. Which means, they do not know when they are trading against it. And, you cannot trade against a Dominant Trajectory, and expect your trade to survive the encounter.

When you combine the Trajectory dimensions of TCD and DV, with OmegaWave Trajectories, you begin to establish a framework for being able to describe future market behavior with a level of precision that simply cannot be replicated by "trends."

With the addition of the Trajectories taken from Alpha-4, Alpha-5 and Alpha-7 Delta Class II indicators, one can get a very full picture of where price goes "next" with relative ease. Each Alpha indicator contains eight (8) dimensions/trajectories. 8 x 3 = 24. Which means that you now have a total 6 + 24 = 30 different Trajectories to use in the statistical analysis of price.

Those 30 Trajectories are merely the baseline tip of the 'Delta' iceberg. There are other primary Deltas that I have discovered and there are an infinite number that have yet to be discovered. Delta based indicators open a whole new world of possibilities when it comes to the statistical analysis of price action.

Delta Class I, Delta Class II and Delta Class III, are as far as I have been able to get in 10 years worth of research. There are many more to be discovered. The come in two (2) basic forms:

- Contiguous
- Non-Contiguous

To explain that would open the door to a lot of lecturing that I just don't have the energy to get into right now. There is a lot that has to be unpacked on a fundamental level before the higher architectures can be fully understood.

However, any Delta, by definition (no matter how you design it) must be the difference in price between two (2) price points. So, as a natural consequence there are only a handful of Contiguous Delta relationships, with the vast majority of the remainder being Non-Contiguous Delta relationships.

I hope that clears it up just a bit.
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I salute the master , my hero , the rational arguemetist WTF

Atticus .....apologise!

#497 Aug 24, 2012

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atticus
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Quote from oilfxpro:

U fuckin little prick ......there ws no thread until Baron invents it
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IG thread. http://www.elitetrader.com/vb/showthread.php?s=&threadid=241701

And my prick is huge, ask Tango.

#498 Aug 24, 2012

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atticus
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Still no maths.

#499 Aug 24, 2012

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atticus
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I work for FXCM.

#500 Aug 24, 2012

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