Importance of catching a trend early

[OMF]

I assume all traders who use a trend following model have a criteria or rule that tells them when a market has entered an uptrend or downtrend. How important is it to catch a trend early.

With 24 hour markets quite often when I get behind my desk in the morning there are already some established overnight trends in the markets that I trade (I use 2 minute intraday bar charts) Now this is what happens
If I jump in the trend quite often it seems that I have entered the market at the end of the trend.

Some times I refuse to jump in and the trend continues for what is a very worthwhile move.

So the dilemma, do you jump in a trend even if it has been established for a while or if you have missed the beginning just leave it??

 

[eegozi]

I assume all traders who use a trend following model have a criteria or rule that tells them when a market has entered an uptrend or downtrend. How important is it to catch a trend early.

With 24 hour markets quite often when I get behind my desk in the morning there are already some established overnight trends in the markets that I trade (I use 2 minute intraday bar charts) Now this is what happens
If I jump in the trend quite often it seems that I have entered the market at the end of the trend.

Some times I refuse to jump in and the trend continues for what is a very worthwhile move.

So the dilemma, do you jump in a trend even if it has been established for a while or if you have missed the beginning just leave it??

I would say that a 2 min trend is no trend at all. If you are looking at that small a timefrme then you should have no problems finding other trends in about another 2 minutes when you can get in "earlier".

Normally, especially on such a short term trend, you want to wait for it to "recycle" or bounce off support. Pick support and resistance and buy on the "dips" to those levels.

You would be better off in my opinion looking for longer term trends on the 15 min charts if you like to focus on short term moves.

Good Luck

 

[OMF]

I would say that a 2 min trend is no trend at all. If you are looking at that small a timefrme then you should have no problems finding other trends in about another 2 minutes when you can get in "earlier".

Normally, especially on such a short term trend, you want to wait for it to "recycle" or bounce off support. Pick support and resistance and buy on the "dips" to those levels.

You would be better off in my opinion looking for longer term trends on the 15 min charts if you like to focus on short term moves.

Good Luck

Thanks for your reply.

What I mean is that I look at 2 minute bar charts not 2 minute trend. If I put a 50 period moving average on this chart then it really becomes a 100 minute trend. The trends sometimes last a good one or two hours though. the problem is always is when is a trend close to its end? Thanks for your reply.

 

[Splitlink]

Why don't you use an average? They are just as good and if you use two or three and they are in line
ie, in a down trend the shorter average is below the higher average, then that is a confirmation. After that, you can use the bars for pullbacks. A pullback is more reliable than trying to spot a top and early trend lines with 2 min charts are pretty near the top, IMO. Be a little patient with entries or you will be in and out like a yo-yo.

That is not as easy as it is explained, in practice, but, believe me, nothing is!

 

[eegozi]

Thanks for your reply.

What I mean is that I look at 2 minute bar charts not 2 minute trend. If I put a 50 period moving average on this chart then it really becomes a 100 minute trend. The trends sometimes last a good one or two hours though. the problem is always is when is a trend close to its end? Thanks for your reply.

I still recommend using a longer time frame. Follow your same system on a longer timeframe like 5 min then.

I also think you need to coordinate the "trend" with a longer timeframe. By this I mean that if a 10 min and 60 min chart also show a trend in the same direction then you have something meaningful. A 2 min chart with a trend could be rather short lived or at worst can move violently against you if for example it is just a downward "trend" on a short time frame that is in reality a retracement of a larger uptrend on the longer time frames. I have attached a 1min chart of Dow Industrial over last 2 days. Notice the "downtrend" using an EMA 5,39 crossover here at various times (after 10am on 9-14-11 and 10:20 am on 9-15-11) but these were short lived and probably poor trades to take. The overall trend was UP in this time period. Coordinate with a longer time frame and you would not have taken them. I am just trying to point out that ultrashort intraday timeframes ALONE are too short to trade meaningfully from a trend strategy in my opinion unless you combine it with longer term information.

 

[Shakone]

I assume all traders who use a trend following model have a criteria or rule that tells them when a market has entered an uptrend or downtrend. How important is it to catch a trend early.

With 24 hour markets quite often when I get behind my desk in the morning there are already some established overnight trends in the markets that I trade (I use 2 minute intraday bar charts) Now this is what happens
If I jump in the trend quite often it seems that I have entered the market at the end of the trend.

Some times I refuse to jump in and the trend continues for what is a very worthwhile move.

So the dilemma, do you jump in a trend even if it has been established for a while or if you have missed the beginning just leave it??

I would jump in the trend. If a trend goes for 50 pips, and you can get in at 40 pips, then sure you might think you got in late. But if it goes for 500 pips, 40 pips is early. You don't know ho far it's going to go. Spot the trend, find a decent method of entry and exit. Don't worry about how far it's already gone.

 

[BeginnerJoe]

Trends for different time frames point in different directions. It doesn't matter which one you follow, it could be wrong. So you are gambling. In that case go to casino instead.

 

[dan1986ccfc]

Beginner Joe

Do you ever post anything useful/constructive? :cheesy:

 

[eegozi]

Trends for different time frames point in different directions. It doesn't matter which one you follow, it could be wrong. So you are gambling. In that case go to casino instead.

LOL,...seriously?

If 3 timeframes ALL confirm a trend in a particular direction you have a greater than 50% probability in my opinion that the trend will continue. I have had great success at doing this. Catching it early is hard but it can be done. What casino gives you 50% chance of a win?

Just to show you what I mean,...here are the charts of INDU at 10 min and 60 min. Match this up with the chart from the 1 min time frame I posted earlier. You will see that ALL 3 MATCHED with a EMA 5,39 crossover at the 12:00 pm hour on 9-14. What signal you use to get out is another discussion entirely. But this is simple to show that multiple timeframes augment the results of the others. Longer ones should coincide with the shorter to the trade or add to positions. I have never seen a casino tell me what cards were likely to be delt next,...but as far as I am concerned this method is the closest thing.

Good Luck

 

[BeginnerJoe]

LOL,...seriously?

If 3 timeframes ALL confirm a trend in a particular direction you have a greater than 50% probability in my opinion that the trend will continue. I have had great success at doing this. Catching it early is hard but it can be done. What casino gives you 50% chance of a win?

Just to show you what I mean,...here are the charts of INDU at 10 min and 60 min. Match this up with the chart from the 1 min time frame I posted earlier. You will see that ALL 3 MATCHED with a EMA 5,39 crossover at the 12:00 pm hour on 9-14. What signal you use to get out is another discussion entirely. But this is simple to show that multiple timeframes augment the results of the others. Longer ones should coincide with the shorter to the trade or add to positions. I have never seen a casino tell me what cards were likely to be delt next,...but as far as I am concerned this method is the closest thing.

Good Luck

Ok, let's see the charts for 5 mins, 10 mins, 15mins, and 20 mins.

 

[eegozi]

Ok, let's see the charts for 5 mins, 10 mins, 15mins, and 20 mins.

WOW,...do you not see that the 1 min, 10 min, and 60 min charts ALL have EMA 5,39 crossovers as of 12:00 pm on 9-14? Of course there are times when the 1 min crosses below EMA 5,39 but the 10 and 60 stay above. When the 1 min goes above again,...well then you have ALL 3 again aligning,...that is a BUY signal. I have provided the charts you asked for (the 1, 10, and 60 min charts were already provided) but if you think about it for more than 1 sec you would see that if the 1 min AND the 10 min AND the 60 min all align so will the interim timeframes of 5, 15, 20, 22, 24, 26.5, 37.76789 min time frames!!

Seriously,...go look at a chart and compare 3 different time frames with EMA crosses. Pick whichever EMA's you want,...it almost doesnt matter. You really should not compare something and make such bold statements like "this is like gambling...go to a casino" if you do not even understand the basic concept.

 

[forker]

You can get in a trend many times before it's over so don't worry about it

 

[BeginnerJoe]

if you think about it for more than 1 sec you would see that if the 1 min AND the 10 min AND the 60 min all align so will the interim timeframes of 5, 15, 20, 22, 24, 26.5, 37.76789 min time frames!!

You have provided no proof. All the time frames will not align. Your cherry picking 1m, 10m, and 60m time frames are just arbittrary. Who is to say the 5m, 23m, and 4h time framse aren't a more valid set ?

 

[eegozi]

You have provided no proof. All the time frames will not align. Your cherry picking 1m, 10m, and 60m time frames are just arbittrary. Who is to say the 5m, 23m, and 4h time framse aren't a more valid set ?

OMG,...

Seriously you can choose any 3 time frames. As I said to the original poster I do not trade these timeframes. I trade 60, daily, weekly. The concept stands on ANY 3 time frames as long a they are separated by approximately a factor of 5. In other words, 1 min, 5 min, 25 min (there isn't a chart so choose 30 min),..etc. You could choose 10, 60, daily or WHATEVER you want. The concept is simple and it works. I dont see how you can say I have provided no proof. I have given you 5 charts with proof that it works. If you STILL do not get it then maybe trading by this method is not for you.

Ok,..here is a challenge,...PICK ANY STOCK and ANY 3 time frames and I can show you how this works. Ok Beginner?...YOU choose the stock and time frames. The only caveat is that the time frames MUST be separated by a factor of ~5 as I described. Of course the time frames have to be something that is on a typical charting software so 23.568 min can not be shown. If you are still not convinced then you are not meant for this method.

If you need even more proof,...well then you are just going to have to be a nonbeliever because I have no plans to post my Brokerage Statements.

Good Luck

 

[eegozi]

You can get in a trend many times before it's over so don't worry about it

OMF,...what forker says is true. The only issue I am trying to help you understand is that a trend on one time frame means much more when compared to the timeframe above and below it (except with 2 min which I think is a bit too fast). When you pick the timeframe you want to trade pick a time frame above and one below. Chances are high that you will be able to enter a trend numerous times as evedenced by the multiple EMA 5,39 crosses that occur on the 1 min chart. You could (in the example I have provided) have entered at the 12:00 pm hour on the 9-14 a long position in $INDU. you could have added to that position and move your stops up when the 1 min EMA 5,39 cross occurs again on 9:30 am and again on 11:15 am on 9-15. Notice that in these 2 times on 9-15 that I am saying you should add to your position that the 10 min and 60 min charts still had EMA 5 above the EMA 39. So you are actually trading the 10 min timeframe in this example but taking your buy indicators off of the 1 min. The 60 min is just there to show the "longer term" trend.

In summary, align all 3 timeframes need to give a BUY signal as indicated by a EMA 5,39 cross at the same time. If they do not align you wait until they do or move to a different trade. Simple.

 

[brettus]

LOL,...seriously?

If 3 timeframes ALL confirm a trend in a particular direction you have a greater than 50% probability in my opinion that the trend will continue. I have had great success at doing this. Catching it early is hard but it can be done. What casino gives you 50% chance of a win?

Just to show you what I mean,...here are the charts of INDU at 10 min and 60 min. Match this up with the chart from the 1 min time frame I posted earlier. You will see that ALL 3 MATCHED with a EMA 5,39 crossover at the 12:00 pm hour on 9-14. What signal you use to get out is another discussion entirely. But this is simple to show that multiple timeframes augment the results of the others. Longer ones should coincide with the shorter to the trade or add to positions. I have never seen a casino tell me what cards were likely to be delt next,...but as far as I am concerned this method is the closest thing.

Good Luck

I think this might have already been said, but say the hourly trend and 15 minute trend are all up and the 2minute is down, could you wait for the 2minute to trend up and then get in using MA's. Might work. I'm sure a bunch of people trade like this.

 

[eegozi]

I think this might have already been said, but say the hourly trend and 15 minute trend are all up and the 2minute is down, could you wait for the 2minute to trend up and then get in using MA's. Might work. I'm sure a bunch of people trade like this.

That is EXACTLY what I am saying. Here is a recent trade I took with AMZN at $217.57. I follow weekly, daily, 60 min. charts. So I will show this as an example on this time period on my recent trade of Amazon.com (AMZN).

Notice that the Weekly has been on a BUY signal for over 1 year. The daily has shown numerous BUY signals over the same 1 year period. The most recent one was on about 8-31-11 or 9-1-11. (See the attached charts). I took the trade LONG at $217.57 with stop at $210.57 on 9-13-11. Notice the trend continues. The most recent price was $239.30 at todays close. So $7 risk and $26 gain so far. Not bad for a simple system that takes all of about 10 seconds to read any stock or ETF to determine if its a BUY or SELL or HOLD.

Simple. See how useful integrating multiple timeframes are?

Good Luck.

 

[forker]

OMF,...what forker says is true. The only issue I am trying to help you understand is that a trend on one time frame means much more when compared to the timeframe above and below it (except with 2 min which I think is a bit too fast). When you pick the timeframe you want to trade pick a time frame above and one below. Chances are high that you will be able to enter a trend numerous times as evedenced by the multiple EMA 5,39 crosses that occur on the 1 min chart. You could (in the example I have provided) have entered at the 12:00 pm hour on the 9-14 a long position in $INDU. you could have added to that position and move your stops up when the 1 min EMA 5,39 cross occurs again on 9:30 am and again on 11:15 am on 9-15. Notice that in these 2 times on 9-15 that I am saying you should add to your position that the 10 min and 60 min charts still had EMA 5 above the EMA 39. So you are actually trading the 10 min timeframe in this example but taking your buy indicators off of the 1 min. The 60 min is just there to show the "longer term" trend.

In summary, align all 3 timeframes need to give a BUY signal as indicated by a EMA 5,39 cross at the same time. If they do not align you wait until they do or move to a different trade. Simple.

Just an FYI, I don't need guidance on trading. Been in the business for many years. Some advice if you wish, everyone's take on the markets is unilateral in nature.

 

[eegozi]

Just an FYI, I don't need guidance on trading. Been in the business for many years. Some advice if you wish, everyone's take on the markets is unilateral in nature.

Hmmm,....I think I was just agreeing with you NOT giving you aguidance. The guidance was directed at OMF as he was the one asking for it. I could say the same to you (which I thought was a bit rude) about what I bolded above..."I dont need advice..."

 

[forker]

Didn't mean to convey my thoughts in an improper manner, although if you found that rude, you in for a difficult time on this board. Apologies nonetheless.