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The concept of "trend" which I cannot grasp

  • #1
  • First Post: Sep 28, 2010 8:31am Sep 28, 2010 8:31am
Hello there,

Using a simulator, I have understood what I am doing wrong in my trading.

After several days of pulling my hair I have realized that it is the mistake everyone does in the beginning of their tradingcareer.
It is trading COUNTER-TREND and HAVING AN OVERCONFIDENCE; and by that I mean that we newbies think we can catch EVERY SINGLE MOVE.
Even the 15 pips correction before the 150 pips move back in trend again.
And as always, time tells if we are right or wrong. And in my case, WRONG.


Now, I have been searching allot and reading quite many books (right now I'm reading Martin Pring on price patterns) but as always, nothing gives you more of the "right view" than asking direct questions and trying it (i.e EXPERIENCE).

Now I have looked at several charts to have my "aha"-moment which I fail to have every single time. And when I try it live, what seems to occur is that when we have that "from left to right" the market tends to change it's direction. It is too clear that the market is in a bull trend.

What I am trying to say is this:
I see a market. It is making higher highs and higher lows. So I believe it's in an uptrend. Immediately when I enter the market to go long. It reverses.

Now the hard thing for me to understand is when it is a reversal or retracement. As I see it, the only way to know it is when it actually starts trending again, or deviates from the trend and starts a new one.

Now I only trade naked. By that I mean a chart, trendlines, and candlesticks. Nothing more.
What am I missing now, or what have I missunderstood? I simply cannot grasp this "trend" concept.

Thank you for taking time. I apologise if the English is incorrect or misleading.
  • #2
  • Sep 28, 2010 8:43am Sep 28, 2010 8:43am
Ok so I believe in the idea that everything is easier when it is visualized, so I will try to give an example here.

Assuming everyone trades the EURUSD and have noticed that we are in a uptrend.
Now, what I cannot grasp is this:

Pull up your EURUSD 1HR chart, look at date 06-08-2010 @ 16:00. (my time being GMT+1)
The time is really irrelevant, it should be the highest point in you chart, marked with "1" in the attached chart.

What happened before this? The market was trending UP, making HH and HL.
What happened after this number 1 point? The market traded down significantly, approx. 700 pips.
Now, during this downtrend period of about 700 pips the market made LH and LL.

What I am trying to demonstrate with this example is that the market made only a retracement before continuing it's uptrend once again. While I believed it was a new trend DOWN, I was wrong. So the question is, can someone enlighten me on the concept of TREND. The difference between retracement and reversal?

Attached Image (click to enlarge)
Click to Enlarge Name: FFtrend.jpg Size: 158 KB
  • #3
  • Sep 28, 2010 8:43am Sep 28, 2010 8:43am
No one knows if it's a reversal or retracement. Accept that and it will help you understand what needs to be done.

As for entering at the top/bottom, well that's what most people do. It's hard to get into a running market and many people enter when the pain of not being in gets too great, so they then enter at usually the wrong spot.

The other thing is the time frame you use. That makes a huge difference.
  • #4
  • Sep 28, 2010 9:07am Sep 28, 2010 9:07am
Quoting Dopey
No one knows if it's a reversal or retracement. Accept that and it will help you understand what needs to be done.

As for entering at the top/bottom, well that's what most people do. It's hard to get into a running market and many people enter when the pain of not being in gets too great, so they then enter at usually the wrong spot.

The other thing is the time frame you use. That makes a huge difference.
Thank you for your respond! (Quick one )
I understand that we can never know if it is a reversal or retracement before, but I do believe the market has tendencies and therefore will "show" in one way or another if it is a retracement or not.
One example on this is that in retracements, there are buying interest during the decline, in reversals, it often isn't.


And the second parantese you made there, is what lies in my interest.
You say that:
"It's hard to get into a running market and many people enter when the pain of not being in gets too great, so they then enter at usually the wrong spot."

Ok let's say I am a smart trader, and I know I cannot catch every move. So I just catch the ones giving me a signal. By signal I mean candlesticks. Let me show you by pictures.

In the picture number one we have a nice uptrend. HH and HL. Then we have a retracement (sideways one), in this retracement I look for signals, If it is shooting stars and bearsh engulfings I'll SHORT.
If it is inside candles and hammers etc. I'll buy.

Since we have an uptrend and it is making hammers, ofcourse we'll buy correct? Since the hammer is a BULLISH signal.
Attached Image (click to enlarge)
Click to Enlarge Name: FFtrend2.jpg Size: 162 KB




Now here we have another example, in picture number two.
Attached Image (click to enlarge)
Click to Enlarge Name: fftrend3.jpg Size: 172 KB


Once again we have a nice uptrend with HH and HL.
I have put a cross over what we didn't know. What I want you to see is that "area of signals". Which once again is hammers, and many hammers after eachother.
Now this happens often to me, that the market makes these kinds of bullish signals and then just falls through, as if there is no support there whereas it actually is.

THIS, ladies and gentlemen, is what I cannot understand and as you see, TRULY need help with.

Thank you
  • #5
  • Sep 28, 2010 9:27am Sep 28, 2010 9:27am
I know exactly how you feel. Can not give you any better advice as I am also looking for the answer to this $1 000 000 question. Lets hold thumbs that one of the educated traders can give us an answer.

Bets tradings
  • #6
  • Sep 28, 2010 9:50am Sep 28, 2010 9:50am
Feel the markets. To detect trend is to feel the markets. This means using right side of brain for intuitive trading.

Using right side of brain correctly is as good as training it receives.

Once you go through intense training, you develop a feel which is subconscious competence. You will glance at price for 15 seconds and you know which side you will take a trade with risk management.

To begin in right direction, scrap all automatic tools and use brain which is most powerful processing machine in an entire universe.

The first step for next 3 months will be to maintain journals in word, maintaining OHLC data in an excel, learning and revising every day trading patterns.

Your ultimate goal should be to go through 500 + hours of training to develop subconscious competence.
  • #7
  • Sep 28, 2010 9:54am Sep 28, 2010 9:54am
Price going up or down doesn't mean it's a trend. Usually a decent trend always begins wiht a decent thrust. The move will break several s/r's in short amount of time. So when you're looking to see which side to trade, look back until you see a strong thrust in any direction. Think of 'momentum' rather than trend.
  • #8
  • Sep 28, 2010 10:43am Sep 28, 2010 10:43am
Quoting 4xtrend
I know exactly how you feel. Can not give you any better advice as I am also looking for the answer to this $1 000 000 question. Lets hold thumbs that one of the educated traders can give us an answer.

Bets tradings
Thanks man, yeah there are allot of us that feel this way, but let me encourage you and also encourage myself. I believe this is the beginning to successful carreers. And by this I mean that it is also good to know, what you do not know!
Good luck mate.


Kingfisher: This sounds very interesting, could you develop this more do you belive? I have never approached trading in the thought that it is our brains, I tend to believe that it is all about reading it, understanding it and experience. As said, very interested in your approach!!

Hilmy: Sounds very interesting and I would love to hear or perhaps read more. Do you have any sources to this information? Perhaps any pages or something similar? That would be very kind.
The 'momentum' approach is what I do think about often, that if it is a big hard candle to one direction, market will most likely continue in that direction. But I would love to read more about this!
  • #9
  • Sep 28, 2010 11:27am Sep 28, 2010 11:27am
Number 1 you marked is a Bearish Pin Bar and there was probably a significant resistance level at that point.

Quoting Carnegie
Ok so I believe in the idea that everything is easier when it is visualized, so I will try to give an example here.

Assuming everyone trades the EURUSD and have noticed that we are in a uptrend.
Now, what I cannot grasp is this:

Pull up your EURUSD 1HR chart, look at date 06-08-2010 @ 16:00. (my time being GMT+1)
The time is really irrelevant, it should be the highest point in you chart, marked with "1" in the attached chart.

What happened before this? The market was trending UP, making HH and HL.
[i]What happened after this number...
{Promotion Removed}
  • #10
  • Sep 28, 2010 11:31am Sep 28, 2010 11:31am
Quoting antonioforex
Number 1 you marked is a Bearish Pin Bar and there was probably a significant resistance level at that point.
Thanks for the respond!
The question is not about the candlesticks indicating a change, it is rather about the "flow" of the market which I don't understand.

And also you are incorrect, it is NOT a bearish pin bar. The candles body is very big in proportion to the wick/tail, and therefore it is not an pinbar.
In a pinbar (bear/bull) the tail should be 2-3X the body.
  • #11
  • Sep 28, 2010 11:41am Sep 28, 2010 11:41am
Carnegie,

Thanks for correcting me. I might be incorrect but I've been using 'my pin bars' combined with something else to effectively scalp the market for the last several months.

Either way good luck with finding an answer to your question. I stopped looking for it a long time ago. In my opinion it is hard to be even 50% certain why market is doing what it is doing since there are trillions of dollars in the market and it will move the way the way it wants to move. I don't try to reason with it nor question it, I just follow it. That's good enough for me. Good luck!

Antonio

Quoting Carnegie
Thanks for the respond!
The question is not about the candlesticks indicating a change, it is rather about the "flow" of the market which I don't understand.

And also you are incorrect, it is NOT a bearish pin bar. The candles body is very big in proportion to the wick/tail, and therefore it is not an pinbar.
In a pinbar (bear/bull) the tail should be 2-3X the body.
{Promotion Removed}
  • #12
  • Sep 28, 2010 11:55am Sep 28, 2010 11:55am
Quoting antonioforex
Carnegie,

Thanks for correcting me. I might be incorrect but I've been using 'my pin bars' combined with something else to effectively scalp the market for the last several months.

Either way good luck with finding an answer to your question. I stopped looking for it a long time ago. In my opinion it is hard to be even 50% certain why market is doing what it is doing since there are trillions of dollars in the market and it will move the way the way it wants to move. I don't try to reason with it nor question it, I just follow it. That's good...
No problem man, hopefully you will correct me soon or help me find my path so we'll both be helping eachother.
Okay sounds interesting and good luck!

Thanks but I believe that humans follow "rules" and are constructed as eachother and therefore follow eachother. I'm not saying I am trying to find the holy grail, I'm just trying to find a simple way for me to understand the market.
  • #13
  • Sep 28, 2010 3:59pm Sep 28, 2010 3:59pm
Quoting Carnegie

Hilmy: Sounds very interesting and I would love to hear or perhaps read more. Do you have any sources to this information? Perhaps any pages or something similar? That would be very kind.
The 'momentum' approach is what I do think about often, that if it is a big hard candle to one direction, market will most likely continue in that direction. But I would love to read more about this!
it's all from observation so the source is me

but seriously i've been exposed to a lot of chart 'behavior' since i looked at 1min chart back in mid 09.
So the best way to learn more is just observe, and 1 min chart is i think the best place to start.

ps. if anybody try to say 1 min chart is all noise..then i say that they just don't like the music
  • #14
  • Sep 28, 2010 9:59pm Sep 28, 2010 9:59pm
Quoting Carnegie

What I am trying to say is this:
I see a market. It is making higher highs and higher lows. So I believe it's in an uptrend. Immediately when I enter the market to go long. It reverses.

Now the hard thing for me to understand is when it is a reversal or retracement. As I see it, the only way to know it is when it actually starts trending again, or deviates from the trend and starts a new one.

.
Just a thought, an uptrend on the H1 TF may be the retracement of a downtrend on the Daily. There isnt one trend in play at one time but many. At some point the weaker trend will give way to the stronger trend.
Time hides Nothing
  • #15
  • Sep 29, 2010 1:50am Sep 29, 2010 1:50am
- there is no such thing as a trend

- candlesticks dont indicate change in trend, they show a stop in momentum

- you have to know why a trade works for you, just because price is moving is no reason to trade

in your first chart there was no reason to go long but there was a very good reason to go short on aug 10th or 11th, trend break + confirmation

in your second chart your area of signals just shows that price didnt want to go down after a strong upthrust, there is consolidation above previous resistance and minor reaction to further testing the highs, there is a good chance price will continue further, you didnt need the concept of trend or candlestick analysis to see that

in your third chart your area of signals, as you call it, was just a stop of the massive selling from the top at previous support, again why should i enter here (dont catch a falling knife etc), just imagine (if you are not in a trade at that area) you were short from the top, what would you do? take profit that you can see, but you could also put your stop into profit right above the high of the first hammer, 7 successive candles couldnt take out the high (you are not yet in a trade) then a candle breaks through and closes well below the area, capitulation of the buyers

but if you hold in your mind the thought that this is an uptrend, ...
Invincibility lies in the defence, the possibility of victory in the attack
  • #16
  • Edited 5:26am Sep 29, 2010 5:12am | Edited 5:26am
Quoting silverheat
- there is no such thing as a trend

- candlesticks dont indicate change in trend, they show a stop in momentum

- you have to know why a trade works for you, just because price is moving is no reason to trade

in your first chart there was no reason to go long but there was a very good reason to go short on aug 10th or 11th, trend break + confirmation

in your second chart your area of signals just shows that price didnt want to go down after a strong upthrust, there is consolidation above previous resistance and minor reaction to further testing...
PERFECT respond! This makes it all clearer, however, the part about "there is no such thing as trend" perhaps needs more explanation to me because as a novice, it is the bread and butter to start with, or atleast that's what they tell us.


You say that:
"..there is a good chance price will continue further, you didnt need the concept of trend or candlestick analysis to see that"
This was very good information to know, may I ask, is there anything to read about these "tendencies" of the market?
Because I have never read about this and I don't really know how to find information about it.

Also, there is one more thing and this is the reason, I BELIEVE, is why I cannot grasp this "trend" thing.
You're telling me that in picture three, if I bought on any of these many bullish hammers, I would be trying to catch a falling knife.
I have been taught that the market moves in 1-2-3's.. Picture below:
Attached Image


And since the market (in the third picutre, with the massive selling) had a first leg (or big upthrust) then had a pullback (atleast, that's what I thought) and therefore I though we would have another leg back UP, since the area of signals demonstrated this with all the bullish patterns..
See how I mean? Sorry if it's unclear


Thank you for an exceptional respond.
  • #17
  • Sep 29, 2010 6:13am Sep 29, 2010 6:13am
The 1-2-3 is all around you..

Check out higher TFs as to check if you're in a bigger trend like this one. Any TF above the hourly shows it was def. a falling knife.
Attached Image (click to enlarge)
Click to Enlarge Name: eurusd.png Size: 37 KB
  • #18
  • Sep 29, 2010 7:57am Sep 29, 2010 7:57am
Quoting EmeraldEyes
The 1-2-3 is all around you..

Check out higher TFs as to check if you're in a bigger trend like this one. Any TF above the hourly shows it was def. a falling knife.
Allright that's good information aswell, looking at higher timeframes.

But let me ask you something, if this is catch a falling knife (while I thought I was only continuing the trend) then what is continuing a trend?
Could someone please show a pictorial example? How should I buy "WITH THE TREND"?

Thank you
  • #19
  • Sep 29, 2010 9:14am Sep 29, 2010 9:14am
Quoting Carnegie
How should I buy "WITH THE TREND"?

Thank you
Most likely the opposite to what the person that answers your question suggests
Time hides Nothing
  • #20
  • Sep 29, 2010 10:30am Sep 29, 2010 10:30am
I have to agree. I'm still learning and trying to think ahead of the crowd then hit that sweet spot in a trend is much harder than it seems.

I'm going to take a shot though. lol

First pic on daily to clarify where your long trade would have failed, which I admit looks like a good spot for a long after that .50 fib bounce.

Now trend trading.. Here's a 2hr of the area where the first candle closed higher than the previous candle for the first time in like 20 candles (theres the higher high we need). I made a trendline on Price Action since we can saw that's a bottom now then threw down a MACD to trend. PA higher, MACD lower (and starting to turn up) which equals a long.. That's a little on how to find a trend. I didn't need to use the MACD since I don't use indicators also which is the way to go but I could tell divergence was there.

After ranging for a bit which you can def. play some shooting stars and hammers for nice profits with use of the BBs. Then the trend goes crazy and you win all ur candle trades and a reward It's the skill of catching that trend I guess that's tricky. Same goes for catching downtrends.
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