**no Counter Trend Trade When Adx Has A Steep Upward Slope.

[trader2419]

hi guys. I wanted to know if any of you use the ADX as filter for when to take or not to take counter or trend trades. I got chopped up in strongly trending markets trying to counter it. then went to straight trend strategy and also got chopped up with trend only in range bound markets. I currently trade the ES and use 13, 5, and 750 shares chart as a trigger. for entries. I am targeting 1-3 points a trade. Basically there is a time and place for when to take and not to take ct or trend trades. I have found out that one needs a synergy between the two styles. For example a perfect divergence pattern manifests it self in range market and produces a good trade. the same signal in a trending market will just give you a stop out. I was wondering if anyone can help to add the ADX as purely objective tool to allow me when is a OK time to take ct trades.??? thanks 4 the help guys!!

 

[trader2419]

hi guys. I wanted to know if any of you use the ADX as filter for when to take or not to take counter or trend trades. I got chopped up in strongly trending markets trying to counter it. then went to straight trend strategy and also got chopped up with trend only in range bound markets. I currently trade the ES and use 13, 5, and 750 shares chart as a trigger. for entries. I am targeting 1-3 points a trade. Basically there is a time and place for when to take and not to take ct or trend trades. I have found out that one needs a synergy between the two styles. For example a perfect divergence pattern manifests it self in range market and produces a good trade. the same signal in a trending market will just give you a stop out. I was wondering if anyone can help to add the ADX as purely objective tool to allow me when is a OK time to take ct trades.??? thanks 4 the help guys!!

I basically want a objective tool that will allow me to counter the market when it is weak and has little direction.

 

[ektrader]

I basically want a objective tool that will allow me to counter the market when it is weak and has little direction.

Hi Trader2419,

I'm a counter trend trader myself so let me offer a few words. The ADX is'nt the best tool for that.The ADX is a tool to use when you're already in a trend and need confirmation to stay in it.

I find the best way to ccounter trend trade is at the very top or very bottom of price ranges. People who have already been in the trend will start to take profits at the same place the market turned before. This is were you enter.


Happy Trading

Ektrader

 

[jak672]

Trader 2419,

The Relative Strength Index is a good stochastic indicator, indicating a market when is either overbought or oversold or simply flitting in the middle, by relating the current price to previous periods' closes. This tool is particularly useful in range-bound markets, as it can powerfully predict when a peak or trough has arisen. When a trend takes off, it can remain over bought/sold for a long time - thus leaving a trader very vulnerable.

You could use the ADX to determine whether a market is trending. If it is not, you can use RSI with much greater confidence. If a market is strongly trending, largely ignore the RSI. I personally also like using MACD Histograms with SMAs and SMA envelopes on the price action. These combined comprise my trading tool-box.

Good luck.

 

[Bolimomo]

I think using ADX to tell you if a stock is in a trend is ludicrous. You can tell from the price itself. If nothing else, use a 20MA. If price is comfortably above 20MA, price is trending up. I use a modified version of GMMA (Guppy Multiple Moving Average). When the MAs in the long-term group line up nicely, price is nicely trending.

I had tried using ADX to trade in the past. I found that there was not much value in it. For example sometimes when price ran up in a trend. ADX extended to 50 (rare). I started fading it and kept shorting. Only resulted in big losses. ADX went further up to 55 or even higher. It's just that ADX by itself does not offer any viable trading strategy.

Same to RSI, Stochastics and CCI. I do use them. I like looking at them. But to trade you cannot rely on the indicators' values alone.

If you want to fade a trend, use Fibonacci analysis to project the likely point where trend will end (extended, bubble). Then look for RSI/CCI-price divergence. Along with a price double top pattern (and reversal times for intraday). Then you have a better chance of success in fading trends.

 

[trader2419]

I think using ADX to tell you if a stock is in a trend is ludicrous. You can tell from the price itself. If nothing else, use a 20MA. If price is comfortably above 20MA, price is trending up. I use a modified version of GMMA (Guppy Multiple Moving Average). When the MAs in the long-term group line up nicely, price is nicely trending.

I had tried using ADX to trade in the past. I found that there was not much value in it. For example sometimes when price ran up in a trend. ADX extended to 50 (rare). I started fading it and kept shorting. Only resulted in big losses. ADX went further up to 55 or even higher. It's just that ADX by itself does not offer any viable trading strategy.

Same to RSI, Stochastics and CCI. I do use them. I like looking at them. But to trade you cannot rely on the indicators' values alone.

If you want to fade a trend, use Fibonacci analysis to project the likely point where trend will end (extended, bubble). Then look for RSI/CCI-price divergence. Along with a price double top pattern (and reversal times for intraday). Then you have a better chance of success in fading trends.

I really dont hold much credence when someone says a tool is ludicrous. There is a time and place for the use of a tool. To say a tool is ludicrous, i would have to dismiss that statement. It obviously and clearly shows when prices are trending or are range bound. Your method is too subjective and leaves too much room for human error.

 

[Bolimomo]

I regret for using the term "ludicrous". It is too strong. I should have used "less than useful". But my opinion on the ADX indicator is still the same. Less than useful.

 

[Skill Leverage]

Price action is pretty good for this, as it tends to be for most things.