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How do you find and confirm a trend?

  • Post #1
  • Quote
  • First Post: Aug 21, 2007 12:48pm Aug 21, 2007 12:48pm
Dear All Traders,

One of the golden rules of trading is "follow the trend".
I would very much like to do it. BUT I find it very hard to find the trend. Does anyone here have any idea of how to find and confirm a trend? I think if one successfully find a trend, it should tell both the direction and duration:
1. Up / Down
2. Within 1 hour / 1 day / 1 week / 1 month

Please share your ideas of how you'd find and confirm a trend and so you can follow it. Thank you!
make some money, have some fun, leave some footprints
I always put a 26 SMA and a 52 SMA on the weekly chart. But that's just me.
Take a report.
Simple, look from the left side of the screen to the right. Is it going up or down? Or all jumbled and really no direction? If theres really no set direction, it's ranging. If there is one side dominance, it is in a trend. Make yourself trendlines, which is easier said than done at first, but with practice you will get the hang of it. Good luck in your trading career.
I dream, therefore I become.
trends are whatever you want them to be.. it is up to you to define a trend for yourself.

It all depends on what you are trying to get out of the market. If you are a longer term trader your definition of a trend is going to be different from shorter term traders.

I spoke to Tom Basso and Ed Seykota on this subject a few months ago and they had some very interesting things to say. If you visit my personal trade journal by clicking the link in my signiture you can look at what they had to say when I asked them a question similar to your own

let me know if this helps
Dave

P.S. Im not sure if you are aware of this, but "Boos" in farsi is Kiss
The obvious is what Mike said, left to right. It's sort of an acquired taste whatever you become used to. Look at higher time frames, i.e. daily, weekly because in my opinion those are the only real trends.

Technically I've seen the 200 EMA and stacking in the proper order of the 200, 100 and 50 EMAs can be real useful. That is to say in an uptrend the order top down is 50, 100 and 200; the reverse holds in a down trend. You can do this all the way down to the 15 minute chart but it may be more ambiguous at those levels. I know people that do real well trading death crosses or golden crosses in conjunction with a confluence of other events. If a pair drops below the 200 EMA on the daily chart that is often considered a trend reversal, but that takes a while.

Otherwise, staying abreast of fundamentals say, trade deficits, interest rates, political events etc. will tell you a lot about the stability of a trend. Watching the US economy is probably one of the biggest influences obviously, especially since recent events have shown it can have massive effects on the global perspective. When the US finishes a run of interest rate reductions or increases, expect a change in direction of most pairs. Housing obviously is key.

I've always wondered though, in a large weekly/monthly trend, what really does change it's directions?

There's obviously more there than just interest rates, otherwise the Euro would be declining against the USD. I've heard that may have to do with the US trade deficit with Europe, I don't know.

Short answer though,

I'd still go with left to right; in any frame it's the easiest.
Just go out and get a copy of John Murphy's "Technical Analysis of the Financial Markets", and read Chapter 4. FWIW, the book is pretty much the standard.
So it seems a glance from left to right on the chart best identifies the current trend. But do u zoom in your chart to the smallest zoom possible to get the trend or leave the chart at normal zoom? I find many times that makes a big difference, I mean an uptrend in the normal zoom can be a downtrend in the smallest zoom. What's your suggestion?

To Superdezign, Thanks but I can't open your journal...
make some money, have some fun, leave some footprints
Thats exactly why I never took that as an absolute truth, although someone could argue as you zoom in you are really just focusing on a smaller timeframe, and as you zoom out you are seeing a longer term trend.

Like I said in my last post you have to define a trend for yourself, write out on paper what you know to be true about a trend. It is amazing how simple it is to identify a trend, but you have to be careful and make sure your definition of a trend and what you use to identify one helps you get what you want out of the market.

There are as many trend following strategies as there are traders..

... if you still want to take a look at my journal click here

Hope this helps


Quoting boostrade
So it seems a glance from left to right on the chart best identifies the current trend. But do u zoom in your chart to the smallest zoom possible to get the trend or leave the chart at normal zoom? I find many times that makes a big difference, I mean an uptrend in the normal zoom can be a downtrend in the smallest zoom. What's your suggestion?

To Superdezign, Thanks but I can't open your journal...
One of several ways. I trade both 5 minute and 24 hour charts so there is some variation. I think the easiest way is to go to a slower time frame from what you want to trade (if you trade 3 hour, go to a daily chart) and put in a 20 period simple moving average. If the market is above the MA, then the trend is long in the shorter time period chart.

For my 5 minute charts, a trend is a fleeting thing and needs to be picked up and acted apon quickly. Look for a period where the price seems to be swinging along a narrow channel. Draw two horizonantal lines on the highest and lowest values and wait for the bar to close outside of this. Once this has happened you need to wait for a conintinued move and then a retrace. Once the market moves back in the original direction and continues beyond where the retrace started, that is the trend. This might only last 50 pips on the EUR/USD though.

NOTE: I'm a newb... treat this with it's due skepticism
Attached Image
Quoting boostrade
So it seems a glance from left to right on the chart best identifies the current trend. But do u zoom in your chart to the smallest zoom possible to get the trend or leave the chart at normal zoom? I find many times that makes a big difference, I mean an uptrend in the normal zoom can be a downtrend in the smallest zoom. What's your suggestion?

To Superdezign, Thanks but I can't open your journal...
Hey, i took a look at Superdezign's journal, and the Ed Seykota article was pretty interesting, as well the article on Mr.Gann, and others. Thanks Superdezign for these .

As for trend reading, im sure most of the traders here are trying to tell you that there is no set way to define a trend, it is up to you a lot, for lack of better wording (on my part). However, im sure you will get no shortage of people telling you how they define a trend. So just use your discretion when reading these.. and see what works for you.

Personally, i use daily and weekly charts to define trends, you can always work down from there. Really nothing else to tell you but that.

At fisrt i used to think that it was simple to define trends, but it takes a little more to define a trend, there are a lot of variables to take in to account.

Try and read that article on Ed Seykota, as well as the ton of other info on trends found here on FF, and around the web. In time you will have your answer.

Good Luck, and Good Trading!
Quoting boostrade
Dear All Traders,

One of the golden rules of trading is "follow the trend".
I would very much like to do it. BUT I find it very hard to find the trend. Does anyone here have any idea of how to find and confirm a trend? I think if one successfully find a trend, it should tell both the direction and duration:
1. Up / Down
2. Within 1 hour / 1 day / 1 week / 1 month

Please share your ideas of how you'd find and confirm a trend and so you can follow it. Thank you!


I believe that one of the myths about trading in particular 4X is the trend is your friend. This is why so many traders are losing. They are hungry for the carrot on a stick that they get sometimes but not all. If the trend goes against you then the trend is the end.

The real friend in 4X is CONDITIONS. Whatever system you use if it helps you focus on conditions then you will have a higher percentage chance of catching a trend or raking in pips on a range. Where alot of us get bitten is when trend changes to range and range changes to trend and a trend on M5 is not a trend on H1 and a range on M15 is not a range on H4 and on and on.

focus on the conditions of price action and market sentiment. Then fine tune this to your main Time Frame.

Use Multiple Time Frame analysis to get a feel for speed of conditions changing and for best entry and exit.

We who focus too much on trend will be greatly pleased when we get alot of pips and we will be equally disappointed when we lose lots of pips.

traders who focus mainly on a trend are the ones who keep moving their stops because, "It just can't keep going in that direction. It's got to turn around sometime. Auugh!"
Up Trend:

Price makes a HH followed by a HL, then another HH

Down Trend:

Price makes a LL followed by a LH, then another LL


Time Frame:

Each time frame might have a different trend.
It is logical, as with many systems, to trade in the direction of a higher time frame than you trading on. For example if the 30 min trend is up, take longs on the 5 min.

The two articles attached, I consider, essential reading.
Attached File(s)
File Type: pdf Martin Pring - Peaks And Troughs.pdf   184 KB | 1,495 downloads
File Type: pdf Buffy Price Action.pdf   113 KB | 2,570 downloads
Quoting boostrade
Dear All Traders,

One of the golden rules of trading is "follow the trend".
I would very much like to do it. BUT I find it very hard to find the trend. Does anyone here have any idea of how to find and confirm a trend? I think if one successfully find a trend, it should tell both the direction and duration:
1. Up / Down
2. Within 1 hour / 1 day / 1 week / 1 month

Please share your ideas of how you'd find and confirm a trend and so you can follow it. Thank you!
I use 1 tf higher stoch as trend. see the chart. d1 tf, use w1 stoch as trend.
Attached Image (click to enlarge)
Click to Enlarge Name: audusd.jpg Size: 68 KB
Quoting superdezign
trends are whatever you want them to be.. it is up to you to define a trend for yourself.

It all depends on what you are trying to get out of the market. If you are a longer term trader your definition of a trend is going to be different from shorter term traders.

I spoke to Tom Basso and Ed Seykota on this subject a few months ago and they had some very interesting things to say. If you visit my personal trade journal by clicking the link in my signiture you can look at what they had to say when I asked them a question similar to your own

let me know if this helps
Dave

P.S. Im not sure if you are aware of this, but "Boos" in farsi is Kiss
wow, i love your journal. Very insightful
Working towards CME membership
This is the best on Trend i´ve tested.
I have an EA trading just this 3SMA:

http://www.hectortrader.com/coursechapter1.php


Cheers

Carllos
"Hoe ur pips mate?" fxcarllos
Quoting hilmy83
wow, i love your journal. Very insightful
thank you
  • Post #17
  • Quote
  • Edited 11:45am Aug 22, 2007 11:33am | Edited 11:45am
the thing I do not like about MA's or any other indicator for that matter is the fact that they have set parameters.

The market changes constantly.. the past few weeks are living proof, the voltility of the market has been wild! Average daily ranges have in some cases quadrupled! What does this mean? Well, that 34 MA (or whatever you decide to use) that use to make you money may no longer work, now that the markets has changed and become more volitile, that 34 MA may get whipsawed around to much and if that is the case you will end up giving back all the profits you earned from when the 34 MA did the trick. A 50 MA may do the trick now, or maybe even a 100 MA, that is until the market calms down, then a reverse scenario of what just happened will occur..

That is why any strategy I employ has to be EXTREMELY robust and does not rely on any set parameter to make money. I am in it for the long run, so my strategy has to last me until the day I die!

How do you keep strategies robust? Its easy, keep is simple! A trading strategy has to be simple in order to capture the logic of it all. The Best traders of ALL TIME have all employed a very simple strategy and made millions of dollars.

If you want to define a trend, do some research, find out what works for you.. just remember, stay away from complicated gizmos, indicators, and complex theories... keep it simple

hope this helps
Dave

Quoting Carllos
This is the best on Trend i´ve tested.
I have an EA trading just this 3SMA:

http://www.hectortrader.com/coursechapter1.php


Cheers

Carllos
oh dont try and scare everyone

its simple

varibles = timeframe and price direction

you only have to really take into account those two things

look at longer timeframes for longer term trades and shorter timeframes for shorter term trades.. then ask yourself, which way is price moving (up or down) then determine where a safe entry would be

ta daaa

Quoting Censce
Hey, i took a look at Superdezign's journal, and the Ed Seykota article was pretty interesting, as well the article on Mr.Gann, and others. Thanks Superdezign for these .

As for trend reading, im sure most of the traders here are trying to tell you that there is no set way to define a trend, it is up to you a lot, for lack of better wording (on my part). However, im sure you will get no shortage of people telling you how they define a trend. So just use your discretion when reading these.. and see what works for you.

Personally, i use daily and weekly charts to define trends, you can always work down from there. Really nothing else to tell you but that.

At fisrt i used to think that it was simple to define trends, but it takes a little more to define a trend, there are a lot of variables to take in to account.

Try and read that article on Ed Seykota, as well as the ton of other info on trends found here on FF, and around the web. In time you will have your answer.

Good Luck, and Good Trading!
  • Post #19
  • Quote
  • Edited 12:26pm Aug 22, 2007 12:24pm | Edited 12:26pm
Quoting superdezign
oh dont try and scare everyone

its simple

varibles = timeframe and price direction

you only have to really take into account those two things

look at longer timeframes for longer term trades and shorter timeframes for shorter term trades.. then ask yourself, which way is price moving (up or down) then determine where a safe entry would be

ta daaa
lol, yea, i thought my wording may have been a little on the "serious" side. But i do think that when a lot of people ask about defining trends, they want the answer to what is in bold type. This was an unecessary assumption on my part.

Sure it's easy to determine the direction of a trend by looking at a chart, and a good dose of hindsight doesn't help either. But is the trend over?..will it continue?...how far will it continue to go?..will it reverse then continue?..etc. I'm sure that everyone who has traded knows these types of questions well. I will now stress the importance of a trading plan!!!

Yea, i'd have to agree with Superdezign on the simplicity of defining a trend. However, all that follows may not be that simple. It can be, but thats all up to you.

But in fairness, i'm getting off topic by trying to answer questions beyond simply "how to define a trend".

Quote
How do you keep strategies robust? Its easy, keep is simple! A trading strategy has to be simple in order to capture the logic of it all. The Best traders of ALL TIME have all employed a very simple strategy and made millions of dollars.

If you want to define a trend, do some research, find out what works for you.. just remember, stay away from complicated gizmos, indicators, and complex theories... keep it simple


Good Luck, and Good Trading!
No one knows the answer to those questions, if we did then we would be sooo filthy rich, and you wouldnt see me on forexfactory you would see me on an episode of cribs..

All you can do is put the odds in your favor, and like you said, have a trading plan.. we are getting a little off topic, but this stuff is all worth reading and understanding nevertheless.

I still stand by what I said before, its up to the trader to define a trend and then decide on how to act accordingly

Dave

Quoting Censce
lol, yea, i thought my wording may have been a little on the "serious" side. But i do think that when a lot of people ask about defining trends, they want the answer to what is in bold type. This was an unecessary assumption on my part.

Sure it's easy to determine the direction of a trend by looking at a chart, and a good dose of hindsight doesn't help either. But is the trend over?..will it continue?...how far will it continue to go?..will it reverse then continue?..etc. I'm sure that everyone who has traded knows these types of questions well. I will now stress the importance of a trading plan!!!

Yea, i'd have to agree with Superdezign on the simplicity of defining a trend. However, all that follows may not be that simple. It can be, but thats all up to you.

But in fairness, i'm getting off topic by trying to answer questions beyond simply "how to define a trend".



Good Luck, and Good Trading!
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