ranging or trending market test

[bbmac]

Hello fellow traders

I wonder wether anyone has any advice on a simple test or technique to ascertain quickly wether a market is ranging or trending? trend lines spring to mind, but does anyone use anything else to determine this, particularly for day trading, ie measuring wether a market is ranging or trending during any given trading day, and over a longer term.

all replies/advice gratefully received.

thank you.

 

[schoe]

Good question BBMac I would like to know this too. I have been whipsawed quite a bit recently in these low movement days.

 

[Simon]

This question seems somewhat akin to the search for the good ol' grail.

In many instances where a 'test' indicates that a trend is in place, it might be in it's final stages, likewise a 'test' that highlights a range bound market could well be ruling out a young trend.

As with most things trading related, by the time something is obvious, it's too bl**dy late.

 

[ianp]

Hi,

I use a 40EMA on a 5 min chart on the ES

if the price keeps crossing the EMA you know its a
whipsaw day..

Ian

 

[TheBramble]

Tushar Chande has done some good work on this. I'll dig around and see if I can find the source/indicators, but ISTR it was pretty consistent on defining short and intermediate conditions as well as an overall bias.

If anyone else finds it before I do, don't be shy...

 

[jamus]

I use the ADX indicator among others to tell whether the market is trending or ranging. Used with other techniques, it does that job really well. Good luck.

 

[Skimbleshanks]

Just think about it for a little. When there is trending, then you'll find that all the indices trend together. At that point they are all in synch with each other.

So therefore when they're not in synch, there will be sideways action. I look at the indices - Dow, S&P, and Nasdaq.

Takes a bit of practice because it is discretionary, but once you've mastered it, it's clear and easy.

So when they are not in synch I look to take smaller gains out of the market. However, when they are in synch then it is easier to ride the trend.

 

[TWI]

The problem is that markets are fractal. A 5-min downtrend is a 60min consol and the same is true all the way up through quarterly and annual charts. Everybody probably uses different methods to determine this I find looking at a market over different time scales is a good way decide whether the assumption on your inital chart is correct. Do not get bogged down in indicators that claim they can answer this question. It is THE question for the trend follower. If you know the answer then you make free money. This is never easy. Keep it very simple.
God trading

 

[ZigZag]

I agree with Skimbleshanks. The key is the NASDAQ which I treat as a leading indicator. At the moment the short term trend on the NASDAQ is down whereas the DOW and the S&p is a 3/4 day consolidation. Watch the NASDAQ and that will dicate the direction or lack of it of the other indicators. Another indicator is to identify a wide range daily bar 3 or 4 days previous. Using that bar as a base line assume lack of trend unless the closing prices of the following bars break out of the base bar.

 

[Skimbleshanks]

As an example of my previous post on this thread, the Dow is currently +38, and the Nasdaq is -3, therefore they are not in synch, and the road will be bumpy until either the Dow slows down a bit, or the Nasdaq hurries up.

 

[zambuck]

Tushar Chande has done some good work on this. I'll dig around and see if I can find the source/indicators, but ISTR it was pretty consistent on defining short and intermediate conditions as well as an overall bias.

If anyone else finds it before I do, don't be shy...

...Aroon and Chande Momentum Indicators....

 

[BBB]

CAn't agree with Skim at all on that one. Look at VECO today for example! Paying too much attention to the indicies results in many missed opportunities. Simple. Look at the market you are trading in it's own context. TWUC!

IMO the only benefit from trading with the indicies may be to take advantage of when program trading kicks in. These programs are arb systems and so will only be in effect until the arb opp no longer exists. Therefore implies scalping. Not advisable in trending markets. Anyway, while you wait for the Nas, SnP, DJ to align, you've probably missed the best part of the move. Lets not forget about the basics here - the index is a lagging indicator. It is calculated from the historic prices of its components.

As Twalker suggests, the trend is in the eye of the beholder. Was that a false bo on the daily chart or a profitable trend on a 5 min chart?

 

[Skimbleshanks]

Perhaps I should have clarified - I trade emini S&P futures, not stocks. So my observation was appropriate for futures traders.

 

[schoe]

Thanks for the replies everyone. So much for watching the Nas the Dows just gone vertical !

 

[bbmac]

thankyou

thanks for all the replies guys, I will certainly test someof them out

bbmac

 

[DaveJB]

Spotting a trending market automatically, eg in Metastock or similar, I've used ADX. Spotting a trend visually I'd suggest isn't difficult if there's a definite trend in place, the difficulty is in deciding if you are looking at a small hiccup or a change from trend to trade or vice versa. In many cases I'd think you can say 'definitely/probably trading, def/prob trending, not sure...' covered most of what you are looking at. The hassle is the 'not sures', but if it's critical then you don't trade until you are sure...

 

[donaldduke]

Today was a ranging day that turned into a trending day..
You could lose alot of money on a day like this if you dont
have your discipline ducks lined up...

 

[philhackett]

Use an EMA @ 8 and an EMA @ 34 cross over as your entry/exit indicator with an Aroon indicator to show the strength of a move.

Sincerely

Phil

Hello fellow traders

I wonder wether anyone has any advice on a simple test or technique to ascertain quickly wether a market is ranging or trending? trend lines spring to mind, but does anyone use anything else to determine this, particularly for day trading, ie measuring wether a market is ranging or trending during any given trading day, and over a longer term.

all replies/advice gratefully received.

thank you.

 

[RUDEBOY]

Phil! Top signature! I LIKE IT! RUDEBOY!