How do you define a strong trend?

Hello

I'm designing my trading signal system. I got some rules that i want to apply to strong trend

But.... the 100k questions

How do I define a strong trend?

Martin

I don't think something like a "strong" trend exists. It is all about propabilities.

The strongest trend that you have ever seen with every available indicator on the planet showing the market is going down can reverse in a millisecond.

The best you can do is use a moving average on the day or week to define the overall trend, and then go from there.

I use the 34 SMA on the 4 hour chart to define my overall trend and the same moving average in the 15 min to define the short term trend.

But always remember price action and previous price action such as resistance and psych areas ALWAYS TRUMPS ANY TREND. Be careful around them.

My 5 cents

Yes indeed the 100k question. In fact if you ask 100 analysts for just a simple definition of trend each will have a slightly different take on the adage higher highs/higher lows = bullish trend etc.

The better question to ask is how do you define when one trend is over, or when another trend begins. Again these questions defy definition. And the same old tired (traditional) definition can only identify a trend after its too late to do anything but chase it.

For my money I trade in any direction as long as it meets my simple criteria. Trying to treat the "trend as your friend" will have you chasing your tail for months if not years...I would save you that frustration.

Yep he "trend is your friend" statement is not so obvious as it seems!

This might not be what you want to hear, but there is no single “right answer”. It depends on who you are, and what your overall trading method is. You should use something that you think you can rely on. If it’s something that you’ve researched and found to be reliable, this will give you more confidence when it’s time to pull the trigger. It’ll also give you more confidence to keep using your method after a few losses in a row. If you’re just using what some joker on the internet said, you might be tempted to dump it too soon.

When you make your decision, your overall trading method should be taken into consideration. For instance, if you’re a daytrader or a scalper you might want to look at something different than a long term trader would. Also, if you choose to not use indicators your list of possibilities is lower than for someone who chooses to use them. Also, if one of your main goals is to “keep it simple” your list of possibilities is probably further reduced.

In the end you might decide on a simple glance at the chart; or drawing trend lines and measuring their slope; or determining how consistently price is making higher lows / lower highs; or variations from the avg number of pips per day in one direction or another; price consistently stayng above certain pivot points; recent price action on a given time frame; or price being above or below certain moving averages (or combinations of moving averages); or you might want to use an indicator like ADX.

Every one of the above requires details like which time frame(s) you use, and which indicator settings you use. I won’t go into more detail here, because it wouldn’t really help you. Whatever criteria you decide on, it should be your own. You should test it, get comfortable and confident with it on demo or micro, then integrate it into your live trading. Of course you might even decide to drop this particular criteria, if you find that nothing is reliable enough for you. Either way, I wish you luck with your quest!

Hello guys

Thanks for your input

I'm aware that "esoteric" questions as not a final answer

I got my rules computed with Multicharts to enter and exit a position. These rules combined a define set of condition in the market.

Now, I want to add another set of exit condition that would be apply only and only if i'm in a position in an actual strong market.

If I'm in a position and market condition change to a strong market in my direction, don't have the stop to close . I don't want to be exited early by a glitch or by big traders catching the lowest price.

Now, I need to define What is a strong market. Witch indicator could give me a value to compare.

Hope it is clearer

Martin

What you want is to close your trade while you are in that strong trend and not afterwards or when that trend already exhausted.
And that is the problem because, all indicators use in there calculations an MA. And and MA is automaticly causing lag or delay in what is happening.

So in the majority of the cases it is going to show you that you are in a strong trend when that strong trend is actualy already finished or exhausted.
For ex widening of the BBands or ADX going up or ATR going up or macd going above or bellow a certain level...etc...

I suggest that you work with a tight trailing stop on that moment. Meaning that if you messure that you are in a very good profit then this means automaticly that your position catched a "trend".
Because you could discribe "strong" trend as follows: if you make a certain profit over a certain time and that profit is bigger then a normal or average profit over that same period of time then mathematicly you could say that you are in more profit then average and then you could conclude that you are in a strong trend. Using a tight trailing stop when this condition is met, sounds to me the best way to preserve that profit.

Friendly regards... FXiGoR

Martin,

If you want to define trend strength mathematically, you might find the following thread helpful.

Good luck,
David

Well, it can be anything you define and program into your system to define the trend as strong as long as it makes sense...

Something important, a trend is never strong all the time....The strength of the trend changes a lot as it unfolds....So it's not going to be the same forever...


Regards,

Nader