Determine Trend Direction

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Objective: Build a master list of methods for determining trend direction.

Aspiring traders will benefit from a single point of reference for developing this particular ability. OP will be continuously updated with convenient links to the different strategies.

Please post anything you don't see on this list.

1. At a Glance
2.
3.

John
We don't count on luck.
 
Moving averages crossovers, for example when a fast moving average is crossing a slow moving average, it will indicate start of a trend...
 
1.6 Defining a trend
Point is that every trader should choose 1 time frame (maximum 2), for their trend definition. This trend definition must always be 2-3, time frames higher than the one of entry. Example: entering on 15 or 30 min charts, use 4 hour for trend definition.
• In a down trend the buy is 10 pips above the high of last two peaks.
• In a uptrend the buy is 10 pips above the high of last peaks with full candle close.
• In an uptrend sell is 10 pips below the low of last two troughs.
• In an down trend sell is 10 pips below the low of last troughs , with full candle close.
• Break of 2 sets of major supports or resistances (with a minimum 50 pip distance between the two ) constitutes a trend.
• Sloping trend and channels must be evident on 4 hour charts (not only on 15 min or 30 min)
• Corrections to the trend /channel lines are not down trends in an up trend , and vice versa.
 
1.6 Defining a trend
Point is that every trader should choose 1 time frame (maximum 2), for their trend definition. This trend definition must always be 2-3, time frames higher than the one of entry. Example: entering on 15 or 30 min charts, use 4 hour for trend definition.
• In a down trend the buy is 10 pips above the high of last two peaks.
• In a uptrend the buy is 10 pips above the high of last peaks with full candle close.
• In an uptrend sell is 10 pips below the low of last two troughs.
• In an down trend sell is 10 pips below the low of last troughs , with full candle close.
• Break of 2 sets of major supports or resistances (with a minimum 50 pip distance between the two ) constitutes a trend.
• Sloping trend and channels must be evident on 4 hour charts (not only on 15 min or 30 min)
• Corrections to the trend /channel lines are not down trends in an up trend , and vice versa.

interesting set of rules, love to use them in there entirety as a system..

do they work as a "closed" system?

IOW, is this all i need?
 
One of the ways I define a trend is bar closes above/below a moving average (typically 5 EMA) this can be applied to any time frame, but for me and my trading style it will range from M5 to H1
 
Determining direction is just Step 1. And straightforward. After that, I suggest two further measures are useful if this is going to be the basis of a trend-following trade, helping to optimise entry and also to select the best instrument from a number of potential charts -
a) probability of trend continuation over desired time period or to desired target,
b) probability of imminent and significant with-trend price movement
 
Determining direction is just Step 1. And straightforward. After that, I suggest two further measures are useful if this is going to be the basis of a trend-following trade, helping to optimise entry and also to select the best instrument from a number of potential charts -
a) probability of trend continuation over desired time period or to desired target,
b) probability of imminent and significant with-trend price movement

Excellent points. Would you like to elaborate on how you go about determining the probabilities you listed?
 
The most reliable way to determining the trend is by taking a real position. The trend will move in the loss making direction. There's greater than 90% probability of that occurring. All aspiring "traders" already know that. But they refuse to accept what they can see with their own eyes.

I use my gut to calculate this probability. I don't know how it works, but it works.
 
Ok, more comprehensive fashion. Throw a dart at a list of instruments written on a 2"x2" piece of paper from 8 feet away. Pick the instrument hit by dart. Toss a coin for direction, heads for buy, tails for sell. Now go put on a position with real money. No monopoly money is no good. The price will trend in the loss making direction with 90%+ certainty.
 
No need to come on, just follow my ultimate DIY trend finding technique and see for your self.

Actually there have been studies, one in Austria and one in Canada, that with proper risk management, you can still make money on coin toss / dart entries...
 
Actually there have been studies, one in Austria and one in Canada, that with proper risk management, you can still make money on coin toss / dart entries...

Yes, demo pips can be made using any method. Real pips on the other hand, can't be made using any method that is out there. This is the reason for aspiring "traders" going on the internet to find free lunch. There's none to be had.
 
Determining direction is just Step 1. And straightforward. After that, I suggest two further measures are useful if this is going to be the basis of a trend-following trade, helping to optimise entry and also to select the best instrument from a number of potential charts -
a) probability of trend continuation over desired time period or to desired target,
b) probability of imminent and significant with-trend price movement


Everyone might have their own preferences here, and some may even use an off-chart technical indicator, but what is alarming is when some traders don't seem to give a thought to either a) or b). I don't have much faith in indicators but I use/have used a range of indications such as -
a)
length of trend since price last crossed 50EMA
no. of price/50EMA crosses in last 6mths
are 50 and 200EMA sloping in same direction?
no. of 50/200EMA crosses in last 12mths
how many weekly highs, lows and closes are on the "right" side of the 50EMA in last 3mths/6mths

b)
how many prior weekly bars does current/last week's bar overlap with?
can an entry order price level be used which shows a breach of a recent weekly high/low?
can entry price be at close of first day after pull-back with higher close than open for an uptrend, or lower close than open for a downtrend?
is price % change accelerating in trend direction over recent weeks?

In both cases, a) and b) -
in stocks, is trend in same direction as major stock indices?
in forex, are other pairs based on this currency also moving in same direction?
 
The original study I believe was done by Tom Basso and was for futures markets using trend following strategy...

If that worked so good, why they stop ? Too hard work throwing darts ?

These kind of studies are normally done on past data, something that beginners do. This is also why beginner's lose. They disregard the business entity that is on the other side of their trade. Businesses are for profit, they are not there to give you money.
 
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