Trending or not?

Pon

Newbie
I am a new member of T2W and enjoying the quality of the website and contributions to the boards.

My question is, I have developed some indicators that generate buy and sell signals to my satisfaction and my SB style of trading, however I still have'nt arrived at an acceptable method to determine if the security is trending or range bound.

I know this is an inexact science and nothing works every time, but I would be interested to hear what different members find are their most effective techniques.
 

tomorton

Legendary member
Hi Pon

One technique is to apply 3 moving averages of varied periods to the price chart. Over the time of interest if the security is ranging they will braid across each other and swap positions vertically with each other and the price line. If its trending they will stack in size order below the price line in an uptrend, above it in a downtrend.
 
Hi Pon, and welcome to T2W :D

The way I use is to look just at the price bars - with your fingers over the chart, roughly measure each price swing. In an uptrend the up swings will be much longer than the downswings (retracements), and vice versa in a downtrend. In a trading range they're about the same, ie you cannot determine easily whether there is an up or a down trend.

I use my thumb and first finger to select one swing, and follow the swings up and down across the chart - easy peasy! :D
 

mmillar

Guest
Coincidentally, I was in a bookshop over the weekend browsing a book on this subject. The book was Rocket Science for Traders by John Ehlers. It was all about Digital Signal Processing and Sine Waves and things all applied to trading. Completely over my head but another alternative if you are into these things.

Maybe the above posts are an easier way to start.
 

spreadbet

Member
Interesting, in the 80's a group of American scientists using the same mathematics that are used to keep rockets on a straight course. If the rocket goes in one direction then the mathematics guide it in the other. Hence if the market went to far in one direction then it must correct. They all made an absolute fortune on futures and options. However they came unstuck following the crash of 87. The market moved basically sideways for quiet some time. The mathematics could not handle rockets that can fly in a straight line without any help.

Cheers

spreadbet
 

stoploss please

Established member
Is it true that in a consolidation, you should count the number of up and down bars. You will have an indication of which way the price will break if you have more bars of one type.

ie more reds, probably going to break down. Can it be that easy.
 

Glenn

Experienced member
"Can it be that easy."
Nothing is that easy in this game. Where money is concerned, expect things to be more difficult. People will be queueing up to take your money off you.

If you want a free daily lesson on Trends and Ranges etc on the current Dow Jones chart, then watch Ed Downs every day on
www.signalwatch.com/markets/markets-dow.asp
Each day you can see how he reads the market and sets levels for long, short and stay out etc, for the next day.
Much better than looking backwards through an existing chart imo.
Glenn
 

options

Senior member
Everyone who follows Ed Downs must be rich then.
You will find that like most gurus he sits on the fence a lot.
He might say we could be going up and past 8600, but if we falter at the 8550 then we might be heading down.
He cannot state that we will close up by 50 pts or down by 150.
And to follow any method such as this would be suicidal.
Looking at a chart over a week + will tell anyone fairly easily how the market has been trending up to that point. And an educated guess might keep you the right side for a couple of days/week. What follows after is anyone's guess and your stance on the market time frame will decide whether you go long, short or hold/stay out.

The only way to tell which way the market is trending as far as I am concerned and suits my trading. (others of course will disagree and have their own view points.) Is to follow the real time bars/candles on a one to five minute time frame. As Skim has said.

Quite often, such as today a market like the e mini dow will go down 100 points back up 85, down 40 etc and close at something like +25
Listen to people like Ed Downs and you wouldn't bother to trade in the market. Make your own mind up and 150+ points would have been very easy to get hold of today.
 

options

Senior member
Stoploss. No. It's not true. It may be right more often than not. You might as well flip a coin.
As Glen says, nothing is easy.
Some people say that the more times resistance is tested the more chance it has of breaking it. Others say that the more times it tests resistance the less chance it has of going through.

No one has come up a plan that works all the time. I would love a plan that is right all the time (wouldn't we all. (I wonder if you would ever get tired of winning?) that tells me what to do at certain points.) ie, buy or sell. But such a plan does not exist.
 

Glenn

Experienced member
"Listen to people like Ed Downs and you wouldn't bother to trade in the market. Make your own mind up and 150+ points would have been very easy to get hold of today."

We're getting off the subject here.
Pon asked about trendines and ranges and Ed gives a perfectly good daily explanation of how/if they are developing on a chart and also how he plays them.
Everyone has to find a timescale that suits them, but that doesn't alter the patterns, trends and ranges etc that can be seen in all time frames.

"He cannot state that we will close up by 50 pts or down by 150."
He doesn't need to. His methods aren't reliant on time.
The simple use of trendlines and ranges contains no element of the use of time.
Perhaps you don't hold overnight ? In which case you are artificially constrained by time, and thereby possibly reducing your opportunities.
Each to his own.

"He might say we could be going up and past 8600, but if we falter at the 8550 then we might be heading down."
I suspect that you haven't followed him very closely. I have since 1998. Not to trade what he analyses, but as a reminder of simple techniques and effective position management in operation.
His methods employ simple levels for long, short and stay out.
He plays those levels and takes maybe 3 losses for every gain.
But the losses are 10 points and the gains are ~100 points.
Most people would be very glad to be able to do that consistently.

"Everyone who follows Ed Downs must be rich then." :)

Glenn
 

options

Senior member
You've followed him since 1998.
Can't you make your own mind up then.

"His methods employ simple levels for long, short and stay out.
He plays those levels and takes maybe 3 losses for every gain.
But the losses are 10 points and the gains are ~100 points.
Most people would be very glad to be able to do that consistently."

I do. and it doesn't take me days to do it either.
Most 'gurus' didn't have a clue when this market crashed. They are all coming out of the woodwork again now. Having conveniently forgotten the pearls of wisdom they imparted and cost people a lot of money in doing so, because they think we are suddenly in a bull market again. Not yet we aint.

If you follow the 'gurus' like sheep you will end up getting shorn.
(bloody hell, I'm starting to sound like LJ.)
 

Glenn

Experienced member
"Can't you make your own mind up then."

What's your problem Options ?
Why are you misquoting me ?
And it's nothing to do with any guru, it's just showing Pon examples of what he's asking about.

I think you misunderstand.

Glenn
 

tomorton

Legendary member
I would love to be able to stay away from range days as my system does well on trending days and makes losses on range days.

Does anyone have any idea how to see when a range market is about to commence. I'm trying to minimise losses when the market is in range mode. Please see my other thread for graphs and details.

http://www.trade2win.com/boards/us-indices/28333-s-p-500-sideways-movements.html


mike -

I'd be surprised if any indicator on its own would tell you a range is about to occur but momentum-based indicators will tell you when a trend is losing power, e.g. stochastic oscillator, try for example 14, 3, 5 settings. If the trend does indeed terminate, a range might commence, but it might simply be a reversal into a trend of the opposing direction. Also, stochastics and the like do tend to go to their extremes and stay there, giving repeated false signals when the underlying price gets stuck in a strong trend.
 

JTrader

Guest
Identifying If The Market Is Ranging Or Trending

I would love to be able to stay away from range days as my system does well on trending days and makes losses on range days.

Does anyone have any idea how to see when a range market is about to commence. I'm trying to minimise losses when the market is in range mode. Please see my other thread for graphs and details.

http://www.trade2win.com/boards/us-indices/28333-s-p-500-sideways-movements.html

Good question mike, well worth asking. I too would love the same type of filter!
Also remember that indicators fail a fair % of the time. They might suggest a range has just ended and a trend has just formed, providing yoiu wth a set-up, and then price retraces back into the range. So finding a reliable filter is always tough to say the least.
 

Cavalry Trader

Junior member
Also remember that indicators fail a fair % of the time. They might suggest a range has just ended and a trend has just formed, providing yoiu wth a set-up, and then price retraces back into the range. So finding a reliable filter is always tough to say the least.[/QUOTE]

I have tried using breakouts (4/12 week), to look for possible set ups, but need to find an accurate second step to confirm that a trend is begining, have tried differing MA, and channels but yet to find anything that gives me enough confidence to rely on

CT
 

rathcoole_exile

Veteren member
is this a "Zombie" thread ? Risen from the dead ? How on earth did this get resurrected after 55 months ?
oh, 55, funny that's a common MA period :) must be a trendline bounce off the monthly chart ?
 
 
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