Defining the Trend

[Dinos]

Hi

Much has been said about "trading the Trend", but how do we define the trend. For me, I'm predominantly a short term position trader, but I do day trade as well.

I define the trend initially, weekly, daily, hourly and trade off the 15. The charts clearly idenfity major S&R, Fib levels, using a range of indicators from DEMA, MA's, stochs etc. I trade the trend, taking trades in the direction of the trend.

However, when day trading, I use the 1 through 5 minutes charts, and often have a mental block in fully exploiting the potential due to my inherrent desire to trade only in the direction of the general trend, the reason being, if I get the entry wrong, I have a good chance of getting out unscathed, trade against it and get it wrong, I have a good chance of getting "stuffed".

By doing so, I'm missing some very good trading opportunities, and I would like to invite day traders to swap their ideas, as to how they trade successfully against the trend and their risk management plan for doing to minimise potential losses.

 

[bbmac]

Nothing inherantly wrong with trading only with the trend.

Defining trend if trading off a 1min trigger is good using the Ales Elder triple t/f approach. Ie define your trend time frame, go down by a factor of 5 and look for the re-entry set-ups off that and time them on your trigger. Eg 1min trigger, 5min intermediate, 30min your trend time frame, or 15/1hr/4hr, Dly/4hrly/weekly etc..

Of course if the trend exists on time frames extending above your designated 'trend' time frame then so much the better.

In terms of defining trend, I tend to do this on all time frames using the higher highs higher lows / lower highs lower lows peak and trough analysis for the overall trend, and of course taking notice of the immediate price action trend too on each t/f (ie whether in a retrace/pullback)

Certainly staying with the trend is arguably safer on the longer time frames, but on the shorter intraday time frames there is a certain amount of oscillation/more noise that can be exploited. (I have discussed some of my methodologies for this in various postings here) My favoured technical appraoch in this respect is identifying former area of supp or res/ areas identified that are likely to offer supp/res and then look to find o/b o/s conditions at them / oscillator extremes/divergence with some band deviation for good measure. Of course in trading against trend, particularly against a strong trend, I am realistic in terms of targets, recognising that the reversal may only be a pullback/retrace, as determined to some extent by:

a. The relative strength of the supp/res causingh the retrace/pullback
b. How many time frames the oscillator divergence/extreme readings extend to
c. The instrumensts relatioonship with it's ATR.

 

[Citizen2007]

Once a trend has developed trading it should be simple, providing you have a good strategy. The actual difficulty for most is actually defing the trend. I have come across many traders who lose all their profits whilst the market is in the process of changing direction.

This period of uncertainty I call alternation, they may be other names for it, i dont know. One thing i discovered a while ago, is the importance of understanding this alternation phase, why it happens and how to identify it.

If you can define a trend, then you should be able to identify this phase of the market also. Taking into account that this alternation happens in all timeframes.

Without a clear understanding of this alternation, could you still define a trend, or would you get traapped into a trading style does not suit you? In other words, all the crireia for setups is met, only thing missing at the end of it is the move.

This is the phase that i think that creates the 3/4 losers out of 10 trades.

 

[dbphoenix]

Hi

Much has been said about "trading the Trend", but how do we define the trend. For me, I'm predominantly a short term position trader, but I do day trade as well.

I define the trend initially, weekly, daily, hourly and trade off the 15. The charts clearly idenfity major S&R, Fib levels, using a range of indicators from DEMA, MA's, stochs etc. I trade the trend, taking trades in the direction of the trend.

However, when day trading, I use the 1 through 5 minutes charts, and often have a mental block in fully exploiting the potential due to my inherrent desire to trade only in the direction of the general trend, the reason being, if I get the entry wrong, I have a good chance of getting out unscathed, trade against it and get it wrong, I have a good chance of getting "stuffed".

By doing so, I'm missing some very good trading opportunities, and I would like to invite day traders to swap their ideas, as to how they trade successfully against the trend and their risk management plan for doing to minimise potential losses.

Combining whatever you use for interday trading with whatever you use for intraday trading can be problematic, particularly when it comes to "trend" as interday trends are largely irrelevant to daytrading, while support and resistance can take on even more importance.

Therefore, first redefine "trend" according to whatever timeframe you're trading. If intraday, focus on the intraday trend, if any. Or forget about trend entirely and trade the bullish/bearish oscillations according to whatever bar interval (if any) you've chosen, e.g., 1m, 5m, tick, CVB.

Then rid yourself of all indicators and focus on the price bars and volume bars (if you're using bars at all). Learn to interpret the efforts of buyers and sellers to push price up or down (there is currently a thread in the PV forum begun by VSA Trader which explains how to do just that).

The simpler you make your setup, the easier it will be for you to make the correct decisions.

Db