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Does the Market Trend More or Range More?

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  • First Post: Apr 17, 2020 6:22pm Apr 17, 2020 6:22pm

Does the Market Trend More or Range More?


A professional trader once told me that the market trends more than it ranges, and that is why they say- "The trend is your friend" and the like. So with this information, after a first failed retracement, if we risk a small percentage of our account per trade, and have a 2x larger take profit than a stop loss, even with a 50% win rate, we would end up with a long term profit.

Which factors come into play to avoid the trader to profit from the above simple strategy?

Quoting runtherace
Does the Market Trend More or Range More? A professional trader once told me that the market trends more than it ranges, and that is why they say- "The trend is your friend" and the like. So with this information, after a first failed retracement, if we risk a small percentage of our account per trade, and have a 2x larger take profit than a stop loss, even with a 50% win rate, we would end up with a long term profit. Which factors come into play to avoid the trader to profit from the above simple strategy?
professional traders just advice , i have never found at anyone who gave me advanced level something but got more free advice. actually without paying there is no one who willing to provide anything.
The Forex market doesn't necessarily trend more. It's just there are a lot of pairs to trade and there's always something "trending".

As for your question, always look at the weekly charts and avoid trading the pair if it's ranging. It's easy to make money during a trending market, but you pretty much give it all back once it starts ranging.
Quoting EG-Invest168
The Forex market doesn't necessarily trend more. It's just there are a lot of pairs to trade and there's always something "trending". As for your question, always look at the weekly charts and avoid trading the pair if it's ranging. It's easy to make money during a trending market, but you pretty much give it all back once it starts ranging.
Thank you for your response. Would you not agree that when a pair is trending, it is likely to trend more? The problem is that the trend does not last long enough, so instead of a ranging market, we have weak trend reversals throughout, giving us losses, because we always hope for a good trend movement to trade the dips. Instead, we would get a dip, enter, and the dip would be too large, and we would for example try to enter on another dip (in the same trend) and it would just run through it and start a new trend. Perhaps it is crucial to be involved in the market for the entire trend, because we would just end up missing good trends and be left with small trends that total losses.

Many trades pinpoint ranging and trending markets differently, and the way we see the market makes all the difference, I know that part.

What kinds of things do you look for in the weekly? The actual trend or the past few bars?
Quoting runtherace
{quote} Thank you for your response. Would you not agree that when a pair is trending, it is likely to trend more? The problem is that the trend does not last long enough, so instead of a ranging market, we have weak trend reversals throughout, giving us losses, because we always hope for a good trend movement to trade the dips. Instead, we would get a dip, enter, and the dip would be too large, and we would for example try to enter on another dip (in the same trend) and it would just run through it and start a new trend. Perhaps it is crucial to...
There will always be retracements on a trending market. What I do is if I reach 60 pips on the direction of my trade, I always move my stop loss to BE +3, which then makes it a free trade. Then as the pair keeps moving in your favor, use trailing stops to protect your gains. You will get stopped, but just need to re-enter again as per your strategy.

Use 5/9 EMA crossover on the weekly. It should give you a clear picture on whether or not the pair is trending.
Quoting EG-Invest168
{quote} There will always be retracements on a trending market. What I do is if I reach 60 pips on the direction of my trade, I always move my stop loss to BE +3, which then makes it a free trade. Then as the pair keeps moving in your favor, use trailing stops to protect your gains. You will get stopped, but just need to re-enter again as per your strategy. Use 5/9 EMA crossover on the weekly. It should give you a clear picture on whether or not the pair is trending.
Why do you state out the Weekly Chart? I would say trending conditions can be found for each time interval separated. You might find a trending condition on the Weekly but Monthly is not. You may find a trending condition on the Daily Chart but H1 its a different story.

Now you decide to enter with the trend because of the Weekly Chart is showing you a clear trending environment but new trends starts to develop from bottom up so all you know is nothing more than before. The trend can change at that point and you are no longer trading with the trend because the trend ended here..
A trend on a chart is only a useful trend if it matches your strategy and set-up rules. There is no universal definition of trend because this would not help all traders . So, let your strategy tell you what sort of trends it needs to work and to work well, then look for those trends.

When you have a trend, remember that the most likely thing price in a trend will do next is continue the trend. This does not mean it is more than 50% likely to continue the trend, it means it is at least 1% more likely to continue the trend than to do any of the other things it could do. The lowest probability is that the trend will reverse next. But always remember a trend can end at any time and so you need a strategy which takes full advantage of a trend but stops you getting badly hurt if the trend ends.
thanks for your nice post, lots of information there is , appreciate all.
Quoting EG-Invest168
{quote} There will always be retracements on a trending market. What I do is if I reach 60 pips on the direction of my trade, I always move my stop loss to BE +3, which then makes it a free trade. Then as the pair keeps moving in your favor, use trailing stops to protect your gains. You will get stopped, but just need to re-enter again as per your strategy. Use 5/9 EMA crossover on the weekly. It should give you a clear picture on whether or not the pair is trending.
I never understand how people always use just a number as a stop loss or take profit; it seems like guesswork to me; it doesn't take into consideration any supports or resistances and the market's volatility is always changing so that 60 number will not work all the time. Perhaps next year 100 will be necessary. And all pairs have different volatility, so using just 60 on all of them will not give them all a fair chance on trades.

Moving to break even will make it a free trade but when we do that we raise the risk that it will hit the break even stop and continue moving towards where the take profit would be; I think moving stops very conservatively is the way to go and follow the larger timeframe trend.
it depends the size of the trend. the longer the trend, the less frequent it is.
of course you have small trends all the time, but most of the time market is ranging
specially on Forex.
Quoting ionone
it depends the size of the trend. the longer the trend, the less frequent it is. of course you have small trends all the time, but most of the time market is ranging specially on Forex.

Good point, often overlooked by dogmatic types who say there are no trends, trend-following strategies have been eliminated by computers or HFT, markets rarely trend, trends end as soon as they are recognised etc. etc.
the trend depends on everyone's psychology including those who are not traders or also by the big hands that banks make.
Quoting kavanto
the trend depends on everyone's psychology including those who are not traders or also by the big hands that banks make.
I am starting to think there is no psychology involved at all. Why should there be?

Do house prices go up and down because of psychology, or market forces?

I think the forex market is too large, so any psychology cant have an effect, there are too many players, any psychology will be cancelled out
Quoting kavanto
the trend depends on everyone's psychology including those who are not traders or also by the big hands that banks make.
Prices in the underlying forex markets are driven purely by the big players - the big banks. Private retail traders are too small and have an insignificant aggregate amount of capital to move the forex markets. The psychology involved in the big banks' buying and selling decisions is not going to be clear to private retail traders, only the evidence of what the banks actually did.
Quoting tomorton
{quote} The psychology involved in the big banks' buying and selling decisions
Institutions large enough to move the forex are not making decisions based upon psychology, they are balancing their risk based upon their economic forecasts and portfolio exposure. They take a maths based approach I assume.

Greed, fear, typical emotions associated with trading would be enough to move a smaller market, a stock of a small company, perhaps even a big company at times, but not the forex.
I think the market does what it has to do.
You'll get what you give.
Quoting Kabbel
I think the market does what it has to do.
I think you have given the best answer.
Quoting runtherace
"The trend is your friend"
The trend is not a friend to grid systems.

~30% time market is trendy and ~70% ranged. The problem is nobody could tell when trend starts/ends. You can observe only post factum that it already started or ended.
Quoting gepards
{quote} The trend is not a friend to grid systems. ~30% time market is trendy and ~70% ranged. The problem is nobody could tell when trend starts/ends. You can observe only post factum that it already started or ended.

True, grid systems and trend-following are not compatible.

You're possibly right about trends being in place only for a minority of the time. But its not a relevant criticism of trend-following. A trend is just a chart pattern: for a single chart pattern to be in effect for as much as 30% of the time is actually an amazing performance. How much % of time do we think any other single TA pattern is in effect, like head and shoulders, or double top, or any one of the multiple types of triangle.
A trend is a range on a higher time frame. Learn to trade ranges and you will find lots of trades.
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