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What does it mean to trade with the trend - Define trend?

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  • Post #1
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  • First Post: Jun 9, 2020 7:42pm Jun 9, 2020 7:42pm
  •  krecci
  • | Joined Nov 2017 | Status: Member | 18 Posts
Hello forum, I've hit this roadblock before and so here I am to see how others approach this. Hopefully this can help other traders as well.

Lets say you're a swing trader intent on entering trades that might last anywhere between a few days to a few weeks or longer and you want to focus on trading the big movements that move in the direction of the "current trend" with clear "structure".

To accomplish this end, you're only willing to enter when you've determined that the structure (eg: higher highs, high lows / lower highs, lower lows) and the "trend" agree with your directional bias.

Except here's the problem, the trend today is different than yesterday's - which is different from last week's trend. And last week's trend might be a pullback on a monthly trend, that might just be a continuation of this past year's trend... which is just a pullback of a longer term 2+ year trend. Same goes for structure: the higher highs and higher lows this week might just be a retracement waiting to continue south.

And this is if you're considering just one time frame. It gets a whole lot more complicated because the 4H, daily, weekly, and monthly candles can and will show different structure and trends from one another even when looking at the same period of time.

So your definition of a trend and your reasoning to trade in its direction on any given pair is extremely likely to differ from another person looking at the same exact price action. You'll be longing a currency someone else is shorting while both having full confidence they are on the side of "the trend".

Do you see where I'm coming from?

I guess what I'm looking for is a way to clarify these concepts in my mind and then have a set of rules that help maximize the probability of being on the correct side of a trend that'll last longer than a few days by standardizing a certain time frame + period of time to consider when deciding on directional bias and then back-testing those rules to see if they're most effective.

This is far easier said than done however, and I can't help but feel I'm over-complicating things a bit.

I uploaded some pictures below to help illustrate what I mean.

These are on the weekly / daily time frame - the 4H and 1H charts would've proved my point even further but I could not pull them up. The arrows are meant to show the bias one might have if only considering that length of time on the chart.

So one trader might feel it's a good time jump on a bull trend while another trader looking at a slightly larger sample of time is eager to sell in the direction of a larger trend, and so on and so forth.

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  • Post #2
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  • Jun 9, 2020 8:28pm Jun 9, 2020 8:28pm
  •  Rastus81
  • | Joined Jan 2014 | Status: Evolving | 228 Posts
Welcome to the rabbit hole

I know what you mean about the context. It depends on your lookback period. In an infinite world, you need to define your own rules.
The market is fractal and hierarchical. Just like an ocean. Check out Mandelbrot. And stay curious.
Why is a Raven like a Writing Desk?
 
 
  • Post #3
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  • Jun 9, 2020 8:40pm Jun 9, 2020 8:40pm
  •  Shabs19
  • Joined Aug 2006 | Status: Member | 3,601 Posts
It will depend on the Timefarme of course, quite possible for a currency to be trending in 2 different directions on 2 different timefarmes.

You have to pick a timeframe then apply simple rules to define a trend.
Follow the Money
 
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  • Post #4
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  • Jun 9, 2020 9:06pm Jun 9, 2020 9:06pm
  •  nim1984
  • | Joined Dec 2011 | Status: Member | 140 Posts
Good question. Here’s my simple answer. A trend on a short time-frame is a single up/down bar on a higher timeframe i.e. “trend trading” provides no edge at all because you cannot predict the next bar on the higher timeframe. “Trend trading” sounds great at the beginning but since it’s all fractal, you realize there’s nothing objective and concrete like a “trend”.

Ask yourself if you can predict whether the next bar of a particular higher timeframe will be up/down. Most likely you can’t, which makes the shorter time-frame “trend” a crapshoot as well
 
 
  • Post #5
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  • Jun 9, 2020 10:41pm Jun 9, 2020 10:41pm
  •  simplemint
  • | Joined Jun 2020 | Status: Member | 10 Posts
you have brought up a very wonderful and important question......it is not a matter of definition but of understanding how market moves.

market definitely moves in a direction up and down.

now technical analysis says that the trend-direction- will continue........but all trends turn and change....so the real question is WHEN IS THE TREND GOING TO CHANGE?

if you do not know that, then all you have to rely upon is 'risk management'........

after 20 years of learning all this ,some of it can only be referred to as bull shit i found Al Brooks....... i knew this guy was special because for twenty years i had read many authors-elliot gann fib Demark.. and many many others.. and traded may of them. i traded eliiot for 5 years

....add Linda Rachke, Toni Hansen..... .i may remember a lot more as i write this.....

it took me 13 years of trading of study of Brooks...YES 13 YEARS IN STUDY OF WHAT ONE MAN SAID ABOUT MARKETS....to understand him.

most people would have deserted him a long time ago ........but i knew that what i had in my hand was a diamond but covered in shit...i had to clean it up.

what Brooks said was that the market moves in two legs or waves.......this is not something new or earth shattering....the ABC move is well know by alll.

but what Brooks said was in a way earth shattering: he said that all moves however big or tiny had a ABC structure.

you can see this every where it is not difficult to understand. but it took me around 13 years to trade it and to make money out of it.
 
 
  • Post #6
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  • Jun 9, 2020 10:45pm Jun 9, 2020 10:45pm
  •  krecci
  • | Joined Nov 2017 | Status: Member | 18 Posts
Quoting Shabs19
Disliked
It will depend on the Timefarme of course, quite possible for a currency to be trending in 2 different directions on 2 different timefarmes. You have to pick a timeframe then apply simple rules to define a trend.
Ignored
As you can see from the first four charts above you get multiple different trends and structure even if you're only analyzing one time frame (in this case the weekly). So you're going to end up with a different trend and market structure if you start analyzing price from 3 months ago, 6 months, a year, etc.

Quoting nim1984
Disliked
“Trend trading” sounds great at the beginning but since it’s all fractal, you realize there’s nothing objective and concrete like a “trend”. Ask yourself if you can predict whether the next bar of a particular higher timeframe will be up/down. Most likely you can’t, which makes the shorter time-frame “trend” a crapshoot as well
Ignored
Yeah over time I've started to realize how much of TA is indeed a crapshoot but I do believe there's some edge to be had when seeing market structure breaking at a pivot point in the direction of a larger price movement. I'm looking to implement that into my trading plan along with various other signals. The issue comes with determining whether that larger price movement has any real staying power when there are conflicting shorter-term and longer-term trends about. And if you're making trend direction a part of your entry then you better have it well-defined.

Cheers
 
 
  • Post #7
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  • Edited 1:58am Jun 10, 2020 1:27am | Edited 1:58am
  •  HeyYou
  • Joined Apr 2015 | Status: Member | 1,753 Posts
Finally someone poited this out.
I found that trading smaller trends like the M15 need more "accuracy" and lead to curve fitting, especially if you don't spend enough time backtesting properly. Maybe machine learning can help.

Also, things like slippage and transaction costs have a stronger impact because of the high frequency of trades, relatively tight stop losses and higher leverage.

Not to mention that it's hard emotionally speaking to deal with big losing streaks.

Now I focus on the YEARLY trend, particularly on stocks and I feel like I'm in paradise.
 
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  • Post #8
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  • Jun 10, 2020 2:49am Jun 10, 2020 2:49am
  •  krecci
  • | Joined Nov 2017 | Status: Member | 18 Posts
Quoting simplemint
Disliked
you have brought up a very wonderful and important question......it is not a matter of definition but of understanding how market moves... the ABC move is well know by alll. but what Brooks said was in a way earth shattering: he said that all moves however big or tiny had a ABC structure. you can see this every where it is not difficult to understand. but it took me around 13 years to trade it and to make money out of it.
Ignored
Hey mint, I'm glad the effort you put in paid off, I'll definitely look up some of his work and see what I can get out of it thanks

Quoting HeyYou
Disliked
Also, things like slippage and transaction costs have a stronger impact because of the high frequency of trades, relatively tight stop losses and higher leverage. Not to mention that it's hard emotionally speaking to deal with big losing streaks. Now I focus on the YEARLY trend, particularly on stocks and I feel like I'm in paradise.
Ignored
I know what you mean except for the paradise part, I'm still looking for that . I decided pretty early on that focusing on longer term trades with a probability edge would keep me in the game longer-term compared to stressing on entering and managing profitable trades on the 5m,15m,1H time frames. The guys that can profit consistently from that kind of trading year in and year out blow my mind.

Maybe starting in stocks instead of forex would've been the wiser choice best of luck
 
1
  • Post #9
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  • Edited 8:37am Jun 10, 2020 8:06am | Edited 8:37am
  •  Shabs19
  • Joined Aug 2006 | Status: Member | 3,601 Posts
Quoting krecci
Disliked
Hello forum, I've hit this roadblock before and so here I am to see how others approach this.
Ignored
Trend depends on the frame of reference that you refer to:

1. The timeframe that will define the highs & lows, ie. 15m , Hourly, Daily, Weekly , Monthly.
2. The length of Time that you are comparing the highs & lows. ie. Few Hours, One day, One Week, Several Months.

You can choose the length of time from the maximum time your chart allows you to the just the last 2 highs or 2 Lows.
You cannot define a trend without context. There lies the problem for most traders.
Follow the Money
 
 
  • Post #10
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  • Jun 10, 2020 8:32am Jun 10, 2020 8:32am
  •  tiborf71
  • Joined Apr 2011 | Status: survivor | 3,349 Posts
i am a trend trader.
I've tried a lot of strategies over the years. but the surest method and simplest is if you just follow the trend.
and most importantly, never fight the trend.
 
 
  • Post #11
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  • Jun 10, 2020 8:35am Jun 10, 2020 8:35am
  •  Shabs19
  • Joined Aug 2006 | Status: Member | 3,601 Posts
Quoting tiborf71
Disliked
i am a trend trader. I've tried a lot of strategies over the years. but the surest method and simplest is if you just follow the trend. and most importantly, never fight the trend.
Ignored
That is not what the OP has asked for, He/She wants to know what is a trend and how do you define a trend ?
Follow the Money
 
 
  • Post #12
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  • Jun 10, 2020 8:38am Jun 10, 2020 8:38am
  •  tiborf71
  • Joined Apr 2011 | Status: survivor | 3,349 Posts
Quoting tiborf71
Disliked
i am a trend trader. I've tried a lot of strategies over the years. but the surest method and simplest is if you just follow the trend. and most importantly, never fight the trend.
Ignored
the problem with many traders is that they want immediate profit. sometimes i have to open 2-3 positions for which i can make a profit.
 
 
  • Post #13
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  • Jun 10, 2020 8:41am Jun 10, 2020 8:41am
  •  OwaisJam
  • Joined Feb 2018 | Status: Digger1 Apprentice | 1,225 Posts
could you plz recommend a book about drawing trend lines coz sometime trend line cut work and sometimes it just fakes thank you.
 
 
  • Post #14
  • Quote
  • Jun 10, 2020 8:51am Jun 10, 2020 8:51am
  •  Shabs19
  • Joined Aug 2006 | Status: Member | 3,601 Posts
Quoting OwaisJam
Disliked
could you plz recommend a book about drawing trend lines coz sometime trend line cut work and sometimes it just fakes thank you.
Ignored
A trend changes in momentum over the period of the trend, so in an uptrend only the current & previous low matter. Vice versa in a downtrend only the current high & previous high. Not rocket science.
Follow the Money
 
1
  • Post #15
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  • Jun 10, 2020 8:54am Jun 10, 2020 8:54am
  •  tiborf71
  • Joined Apr 2011 | Status: survivor | 3,349 Posts
Quoting OwaisJam
Disliked
could you plz recommend a book about drawing trend lines coz sometime trend line cut work and sometimes it just fakes thank you.
Ignored
I think throw away all the books and just rely on your own experience.
 
 
  • Post #16
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  • Edited 11:32am Jun 10, 2020 8:56am | Edited 11:32am
  •  4for4
  • | Joined Apr 2017 | Status: 38737526 / 29052019 | 1,245 Posts
An uptrend has higher and higher supports, while a downtrend has lower and lower resistances.
Once we can identify those supports or resistances, we can identify the ongoing trend and act accordingly ...
Market is not random but unpredictable
 
 
  • Post #17
  • Quote
  • Jun 10, 2020 9:01am Jun 10, 2020 9:01am
  •  Shabs19
  • Joined Aug 2006 | Status: Member | 3,601 Posts
Quoting tiborf71
Disliked
{quote} I think throw away all the books and just rely on your own experience.
Ignored
I think we can throw away your advice for a start,,,,,,, totally useless information.

Why do you post utter garbage.
Follow the Money
 
 
  • Post #18
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  • Jun 10, 2020 9:02am Jun 10, 2020 9:02am
  •  tiborf71
  • Joined Apr 2011 | Status: survivor | 3,349 Posts
Quoting 4for4
Disliked
An uptrend has higher and higher supports, while a downtrend has a lower and lower resistances. Once we can identify those supports or resistances, we can identify the ongoing trend and act accordingly ...
Ignored
very often there is no S / R, so there is nothing to rely on let alone that the reliability of these levels is in doubt.
 
 
  • Post #19
  • Quote
  • Jun 10, 2020 9:04am Jun 10, 2020 9:04am
  •  Shabs19
  • Joined Aug 2006 | Status: Member | 3,601 Posts
Quoting tiborf71
Disliked
{quote} very often there is no S / R, so there is nothing to rely on let alone that the reliability of these levels is in doubt.
Ignored
What utter nonsense,,,,,,,,,,,,,,,,,,,,,,,,,,
Follow the Money
 
 
  • Post #20
  • Quote
  • Jun 10, 2020 9:07am Jun 10, 2020 9:07am
  •  tiborf71
  • Joined Apr 2011 | Status: survivor | 3,349 Posts
Quoting Shabs19
Disliked
{quote} What utter nonsense,,,,,,,,,,,,,,,,,,,,,,,,,,
Ignored
why do you think S / R levels are reliable in terms of trend development.
you are a smart egg.
 
 
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