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Determining Trending vs. Consolidating

  • #1
  • First Post: Jan 13, 2008 5:48pm Jan 13, 2008 5:48pm
As a trader, I have the hardest time trying to determine accurately whether or not a market is trending or consolidating. Because I have a strategy that optimizes each.


From a programming point of view, it gets even harder.


How do you all quantify whether or not a market is uncertain? (Moving sideways)
  • #2
  • Jan 14, 2008 3:09pm Jan 14, 2008 3:09pm
Many ways to tell if a pair is trending, but a very simple way to tell is put a 20 period SMA on your chart. If most of the price action is above the line its an uptrend, if most price action is below the line its a downtrend. No matter what time fram. Take a first look at the daily with it. Since 20 pretty much equeals a month of trading days.


Quoting Ronald Raygun
As a trader, I have the hardest time trying to determine accurately whether or not a market is trending or consolidating. Because I have a strategy that optimizes each.


From a programming point of view, it gets even harder.


How do you all quantify whether or not a market is uncertain? (Moving sideways)
  • #3
  • Jan 14, 2008 3:13pm Jan 14, 2008 3:13pm
I'd imagine then that is the price is on/around the 20SMA, then it's consolidating?
  • #4
  • Jan 14, 2008 3:46pm Jan 14, 2008 3:46pm
Quoting Ronald Raygun
I'd imagine then that is the price is on/around the 20SMA, then it's consolidating?

No here is a picture of a range bound market for a time on a weekly chart. Sorry if chart is big. how it saves. http://picnac.com/images/589post.gif
  • #5
  • Jan 14, 2008 3:49pm Jan 14, 2008 3:49pm
Hope this helps you. Tried to pick simple fast ways to show you. SO many ways to show both. Good luck to you !
  • #6
  • Jan 14, 2008 3:58pm Jan 14, 2008 3:58pm
http://picnac.com/images/9828trending up.gifExample of a trending up pair. See how the price is mostly above the 20 sma line and the line from left of screen to right of screen is higher.
  • #7
  • Jan 14, 2008 4:18pm Jan 14, 2008 4:18pm
Ok Rogue$Trader

I understand how to identify a ranging and a trending market by looking at it. It's some sort of image recognition thing that humans have. I'm trying to teach a computer how to identify the difference.

What indicator/average/other quantifiable method can be used to determine whether or not the market is trending or ranging.
  • #8
  • Jan 14, 2008 4:24pm Jan 14, 2008 4:24pm
Quoting Ronald Raygun
Ok Rogue$Trader

I understand how to identify a ranging and a trending market by looking at it. It's some sort of image recognition thing that humans have. I'm trying to teach a computer how to identify the difference.

What indicator/average/other quantifiable method can be used to determine whether or not the market is trending or ranging.
The market's too dynamic a phenomenon, too many variables.
I'm no programmer believe me! It just seems like a very difficult thing to do. It would have to be almost AI like I think.:
Be able to adapt and learn all the time. Some ranges are 20-pips wide, some 50, some 100's. Also, timeframes to consider.
I imagine, programatically, it's not easy to define.
Carpe Divitiae
  • #9
  • Jan 14, 2008 4:27pm Jan 14, 2008 4:27pm
Quoting fsiltd
The market's too dynamic a phenomenon, too many variables.
I'm no programmer believe me! It just seems like a very difficult thing to do. It would have to be almost AI like I think.:
Be able to adapt and learn all the time. Some ranges are 20-pips wide, some 50, some 100's. Also, timeframes to consider.
I imagine, programatically, it's not easy to define.
Just realised how useless that actually was!
Carpe Divitiae
  • #10
  • Jan 14, 2008 6:58pm Jan 14, 2008 6:58pm
Quoting Ronald Raygun
Ok Rogue$Trader

I understand how to identify a ranging and a trending market by looking at it. It's some sort of image recognition thing that humans have. I'm trying to teach a computer how to identify the difference.

What indicator/average/other quantifiable method can be used to determine whether or not the market is trending or ranging.

No programmer either... But maybe look into if it can tell if a ( just example) 20 sma is at and certain degree angle up it can tell its an uptrend and a certain degree angle down, downtreand. and between xx angle and xx angle a range.
Best I can do. Atleast my post helps keep your thread up towards top. Maybe someone else can help better. Or try another forum in the MT4 forum or the trading systems forum
  • #11
  • Aug 11, 2008 9:18pm Aug 11, 2008 9:18pm
Quoting Ronald Raygun
As a trader, I have the hardest time trying to determine accurately whether or not a market is trending or consolidating. Because I have a strategy that optimizes each.


From a programming point of view, it gets even harder.


How do you all quantify whether or not a market is uncertain? (Moving sideways)

I am interested in the same thing. I am thinking that taking the moving average 'x' periods ago, and currently, and probably somewhere in the middle, and then RangeBound = true if the 3 different MA's are within 'y' pips of each other, and the highest minus lowest price in the last 50-100 time periods are < 'z' pips, then a little backtesting to find good useful values.
Just before finding your post, I also asked if someone had an algorithm they have already built.
Good luck.
jj
  • #12
  • Dec 21, 2008 7:20pm Dec 21, 2008 7:20pm
Quoting jjasper7
I am interested in the same thing. I am thinking that taking the moving average 'x' periods ago, and currently, and probably somewhere in the middle, and then RangeBound = true if the 3 different MA's are within 'y' pips of each other, and the highest minus lowest price in the last 50-100 time periods are < 'z' pips, then a little backtesting to find good useful values.
Just before finding your post, I also asked if someone had an algorithm they have already built.
Good luck.
jj
One useful tool for me is the Guppy Multiple Moving Averages. Obviously it is quite simple for a human to "see" the trend with the GMMA's. What I do, in 'programming' trend recognition, is to set trend = 'yes' if the Long-term group of MAs are 'spread out' XX number of pips AND the short-term group of MAs are also 'away from' the long-term group by X number of pips.

Then the trend is 'over' once the long term group of averages compresses XX% from the trend establishment zone.

It is WAAAAY easier to see this on a chart.

The important things to remember, as I see it is that

1. The Long term group establishes the trend and the long term group ends the trend.

And

2. The short term group must be 'away' from the long term group when the trend starts.

And

3. Near the end of the trend the short term group will very typically stab inside the long-term group many times before the trend actually dies out........which is a great thing. Gives you time to give up on the trend.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: EURJPY weekly GMMA begin.jpg Size: 112 KB
Click to Enlarge Name: EURJPY weekly GMMA end.jpg Size: 139 KB
  • #13
  • Dec 21, 2008 7:32pm Dec 21, 2008 7:32pm
I use the old fashion HigherHigh, HighrLow, LL, LH. If the sequence is: HH,HL,HH,HL o LL,LH,LL,LH, it's a trend, at least on that TF, if they are mixed: HH,HL,LH,HL,HH,LL... I would call it a consolidation where tops and bottoms might define a range.
  • #14
  • Dec 21, 2008 7:40pm Dec 21, 2008 7:40pm
I'm quite pleasantly surprised to see this thread alive again.

In the nearly a year I've had to think over this, the best thing I can think of is to try and count how many bars in a certain range go through a specific price. I'm working out an indicator to try and conceptualize this. Basically, the more bars in a range which cross a certain price, the higher the "score" of that specific price, and the color of that price changes.
  • #15
  • Dec 21, 2008 7:53pm Dec 21, 2008 7:53pm
Quoting Rogue$Trader
...Take a first look at the daily with it. Since 20 pretty much equeals a month of trading days.
Glittering surface with the Motherload below.

So;
On an 1Wk TF Chart, the MA should be {20*4} 80SMA:
On an 1Day TF Chart, the MA should be {20*4*6} 480SMA:
On an 1Hr TF Chart, the MA should be {20*4*6*24} 2880SMA:

Now you are getting somwhere significant.

  • #16
  • Jan 8, 2009 6:57pm Jan 8, 2009 6:57pm
1. take 2 MAs
2. count the number of crosses X between them in N number of bars in the past

This method is easy to program, and will give you the answer. Parameters you need to play a bit are the period/type of MAs and number of bars in the past you look at.

Then the more crosses you get in N bars, the more ranging the market. You can set a threshold that you conside the market trending, ranging or inbetween (transitioning from trending to ranging), based on the value of X you obtain.

I hope this helps
  • #17
  • Jan 8, 2009 8:00pm Jan 8, 2009 8:00pm
Place a red arrow in direction of most traffic
Attached Image (click to enlarge)
Click to Enlarge Name: AA.PNG Size: 27 KB
Check Mate GAME OVER
  • #18
  • Jan 8, 2009 8:00pm Jan 8, 2009 8:00pm
I don't see how you can determine something that has not happened.

By the time a trend becomes a trend and you can see it visually you have already missed the move. Like wise consolidation is only apparent after it has moved between two definable points several times.
  • #19
  • Jan 8, 2009 8:03pm Jan 8, 2009 8:03pm
Willf:

The idea is to determine as quickly as possible, what is happening. I would like to predict the future, but let's face it, I can't, so the next best thing is to determine the present.

challenger78: That looks like the most promising solution. I'll whip up something, put it up here, and move from there.
  • #20
  • Edited 10:05pm Jan 8, 2009 9:49pm | Edited 10:05pm
One way to help bridge the gap might be to
qualify/quantify the impulse movement that
threatens to throw price out of balance (consolidation).
Though follow-through movement (the beginnings of
trending) after the price is gunned cannot be in any
way predicted, it can then be anticipated. I don't program
or system trade at all but, I do look to this impulse as a
necessary prerequisite "indication" of a possible new trend.
"New" paradigm: Consolidation > Impulse > (failed)Trend.
............................^---------------------v.......v
............................^---------------------------v

LOL. I know, I know...nothing new here!
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