Forex Reality Tour #1 - Market Trend % | Forex Factory

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Forex Reality Tour #1 - Market Trend %

  • #1
  • First Post: Jan 12, 2013 12:33pm Jan 12, 2013 12:33pm
It seems every time I'm on FF someone is making a claim that "everyone knows the market trends 20% of the time and ranges 80% of the time". The problem with these types of statements is that there is very little context given to these statements. For example:

What market are you talking about?
What timeframe (if any) are you talking about?
What timespan are you talking about?
How do you define a trend?
How do you define a range?

Without this additional information, these types of statements are rather ridiculous.

So, the purpose of this thread is to see if anyone out there wants to provide some context and concrete data to substantiate the claim that the market trends x% of the time and ranges y% of the time.

Now, of course the definition of a trend can be very personal. Asking 100 people how they define a trend may result in 95-100 different answers. But this is exactly what we are looking for here. I don't think there is necessarily a correct or exact answer to the question, but it would be nice if someone could actually show us how these numbers were derived.

Give us something more than "I read those numbers somewhere and it seems about right". Give us some actual data to backup these statements.

For example, I might say something like:

"The market trends 72.4% of the time and ranges 27.6% of the time."

And to put this statement into the proper context, I would say:
- The market is defined as the EUR/USD
- The timeframe is H1
- The timespan is from 1/13/2010 - 1/11/2013 (about 3 years or about 18,750 bars)
- A given bar is in a trend when the bar closes with the RSI(14) above 55 or below 45.
- A given bar is in a range when the bar closes with the RSI(14) between 55 and 45.

Does this statement now give us definitive proof about the trend percentage of EUR/USD? Probably not. But, at the very least we have added some context to the statement about trend/range percentage. Anyone with a EURUSD H1 chart can verify the accuracy of the data and can form their own opinions about the validity of the statement. We now have something concrete to work with...something more than just some numbers pulled out of thin air.

Any other takers?
  • #2
  • Jan 15, 2013 6:24am Jan 15, 2013 6:24am
The (market) price is always in trend even when people say they're in range
Range market do not exist, maybe only at weekends and even so.

http://s9.postimage.org/44udqk0an/trend_range.png
Never laugh at anyone's dreams. "Dalai Lama"
  • #3
  • Jan 15, 2013 9:35am Jan 15, 2013 9:35am
The Hurst exponent is a mathematically calculated value that gives an estimate on the "trendiness" of a time series.
A random throw of dice would have a Hurst exponent of 0.5, a trending series >0.5, non-trending or "ranging" <0.5.
There are a number of papers that have calculated the exponent for a number of forex pairs, you can google for them.
  • #4
  • Jan 15, 2013 2:35pm Jan 15, 2013 2:35pm
Its all a bit academic. Depending on which time frame you look at you could say price is currently ranging or trending, it completely depends on how you want to interpret the pa.

A quick look at the monthly EurUsd on my phone chart suggests this instrument has been ranging since the beginning of 2006 with bottom of range around 1.1600. Scroll further back you could argue its been ranging since 1985.

With your own figures you seem to be including the times when London is closed? whereas day trading trend followers would probably ignore those closed times swaying the percentage figure. Either way its all subjective and not really worthy of too much attention is it? I mean trade what you see. if price is ranging on your 1h chart its ranging. Someone using daily charts might think its trending yet neither is wrong.

Having said that as part of an indie based system it could be very important to know how often you expect your Indies to tell you 'price is now ranging' but that's very personal and particular to each system so not some thing you can generalise about with percentage figures. average daily range is more of an objective reality isn't it?
  • #5
  • Jan 15, 2013 2:56pm Jan 15, 2013 2:56pm
Like everything else in trading it seems both the terms "trending" and "ranging" are highly subjective and as the market is fractal, price can both be ranging and trending at the same time even according to one person's definition. I stopped trying to categorize them strictly and just started looking at the levels price is likely to react at.
  • #6
  • Jan 16, 2013 9:03am Jan 16, 2013 9:03am
Quoting stevexyg
Its all a bit academic. Depending on which time frame you look at you could say price is currently ranging or trending, it completely depends on how you want to interpret the pa.
Yes, everyone knows that.

Quote
A quick look at the monthly EurUsd on my phone chart suggests this instrument has been ranging since the beginning of 2006 with bottom of range around 1.1600. Scroll further back you could argue its been ranging since 1985.

Not bad...but you left out the most important part - how you determine it has been ranging since 2006/1985.

Quote
With your own figures you seem to be including the times when London is closed? whereas day trading trend followers would probably ignore those closed times swaying the percentage figure. Either way its all subjective and not really worthy of too much attention is it? I mean trade what you see. if price is ranging on your 1h chart its ranging. Someone using daily charts might think its trending yet neither is wrong.

I just gave an example. I'm not one of the people making blanket statements about the trending/ranging percentages of the forex markets. I'm just a guy trying to understand how people come up with the numbers being thrown around. As you can see by the response of this thread, not many can or are able to explain HOW the numbers are derived. I think it is mostly a "I've read the market trends x% of the time somewhere, so that figure must be correct" type of thing.

Quote
Having said that as part of an indie based system it could be very important to know how often you expect your Indies to tell you 'price is now ranging' but that's very personal and particular to each system so not some thing you can generalise about with percentage figures. average daily range is more of an objective reality isn't it?

My system does not care if the market is trending or ranging. Yes, it is a personal thing...we all know that...that is why I said it is a personal thing in the first post. But, again, that is what I am mildly curious about here. How do people come up with these trending/ranging percentages?
  • #7
  • Jan 16, 2013 9:14am Jan 16, 2013 9:14am
Quoting Kanzler
Like everything else in trading it seems both the terms "trending" and "ranging" are highly subjective
Yes, we all know it can be very subjective. But when someone says "the market trends 20% of the time", there must be a method used to come up with that 20% number.

Quote
and as the market is fractal, price can both be ranging and trending at the same time even according to one person's definition.

That is true. And the "person's definition" is what is very seldomly shared. Why do people say a market is trending x% of the time without providing how (ie, that person's definition" of a trend) it was derived?

Quote
I stopped trying to categorize them strictly and just started looking at the levels price is likely to react at.

Great, seems like a reasonable way to trade. But I am interested in reality, not a bunch of number thrown around without any explanation of how they are derived.
  • #8
  • Jan 16, 2013 9:23am Jan 16, 2013 9:23am
why are you hung-up on this? when you open a chart does it go from one corner to the opposite corner most of the time, or does it generally just go nowhere all over the screen?
Congratulations ScalaFX for coming out of the closet!
  • #9
  • Jan 16, 2013 9:34am Jan 16, 2013 9:34am
Quoting nubcake
why are you hung-up on this? when you open a chart does it go from one corner to the opposite corner most of the time, or does it generally just go nowhere all over the screen?
Please nubcake, you've been here long enough to know that the amount of garbage spewed around this place may be unparalleled across the entire web. Inaccurate statements, complete falsehoods, and unsubstantiated generalizations are flung around like pickup lines in a bar.

I'm not hung up on anything. I know how to read a chart...I know how to trade profitably. I just asked a simple question and am interested in any pertinent responses.
  • #10
  • Jan 16, 2013 9:46am Jan 16, 2013 9:46am
sure, but like i said... do your charts go from corner to corner or mostly just all over the screen. i may be biased but i believe it's safe to say that it ranges more than it trends. i don't have "hard numbers" backing this, but that's how i see it and i see no problem generically labelling it 20/80 trending/ranging or something along those lines. surely it's in the ballpark.
Congratulations ScalaFX for coming out of the closet!
  • #11
  • Jan 16, 2013 10:01am Jan 16, 2013 10:01am
Quoting nubcake
sure, but like i said... do your charts go from corner to corner or mostly just all over the screen. i may be biased but i believe it's safe to say that it ranges more than it trends. i don't have "hard numbers" backing this, but that's how i see it and i see no problem generically labelling it 20/80 trending/ranging or something along those lines. surely it's in the ballpark.
I think what zznbrm is getting at is even statements like you just made are still a bit too general. You need to better quantify the statement of 20/80 trending/ranging. A range can be 2000 pips or it can be 10 pips. technically if you pull up enough history on any timeframe you can draw a line at the highest high and lowest low shown and and call it a range, with mini trends in between.

I think the other point that zznbrm is trying to get at is these general statements lead new budding traders astray which is a disservice to what this forum is all about.

Just my thoughts on the matter.

Cheers!
Nothing is impossible, with a willing mind!
  • #12
  • Jan 16, 2013 10:11am Jan 16, 2013 10:11am
but that's the thing, it's meant to be general.

the way i see it is that if the market trended more than ranged then you could basically trade randomly with an expectation that price will move away from your entry one way or another. but anyone who tries this will see themselves just get stopped out a lot at the same price over and over before price pushes away for a bit.

the types of discussions that might arise where people mention it ranging more than trending aren't likely to be stat threads, so it's like expecting someone playing with a toy train to know the forces behind a bullet-train travelling at 100mph. it's not exactly their focus and doesn't serve them to know the nitty gritty at that point in time.

zz should start a stats thread to satisfy his need for hard numbers. but of course then you have to define what's a trend, what's a range, how far does price have to break from a previous range to be considered to no-longer be a part of that range, yadda yadda. it'd just be another perspective where others could just as easily apply.
Congratulations ScalaFX for coming out of the closet!
  • #13
  • Jan 16, 2013 12:34pm Jan 16, 2013 12:34pm
The reason nobody can come up with a source for these numbers is because there's no scientific study backing them. Extremely likely is that someone eyeballed the charts and others instinctively agreed with the ballpark figure. But given how subjective the term "trending" is, and how different markets behave, it's more or less impossible to come up with any exact figure. You're free to create your own definition and select a market you want to analyze and do so yourself for whatever period of time, but coming up with "the" universally agreed upon answer isn't going to be possible.
  • #14
  • Jan 16, 2013 2:59pm Jan 16, 2013 2:59pm
Quoting saulimus
The Hurst exponent is a mathematically calculated value that gives an estimate on the "trendiness" of a time series.
A random throw of dice would have a Hurst exponent of 0.5, a trending series >0.5, non-trending or "ranging" <0.5.
There are a number of papers that have calculated the exponent for a number of forex pairs, you can google for them.
certainly for me this is as close to getting percentage values for range,i use a fractal indi ,not so much for entries but its the best thing ive found to conclude fractal breaks , undoubtedly they conflict as you change the time frame.on a 1 min chart range on average would be much greater than trend,for sure over 70 %.

ill stick my kneck out here and say if i used the same fractal on a tick chart or a 15 min chart it would be the same only not happening at the same time.the fractal ,range will show from range to trend pending the look back,but i would think these 80/20 numbers are based on relevent look back,trading a 1 min chart a couple of hours imho would be sufficient data to look back,im sure looking back to 1986 would be overkill
  • #15
  • Jan 16, 2013 3:12pm Jan 16, 2013 3:12pm
how accurate is this stement

in a trend -the market expands energy
in a range - the market builds energy

i just made that up.
NocturnalFX is no longer offering commercial services
  • #16
  • Jan 16, 2013 3:23pm Jan 16, 2013 3:23pm
Quoting TPOTrader
how accurate is this stement

in a trend -the market expands energy
in a range - the market builds energy

i just made that up.
dont take this the wrong way but that resembles a huge fart
  • #17
  • Jan 17, 2013 10:44am Jan 17, 2013 10:44am
Quoting diceman555
dont take this the wrong way but that resembles a huge fart
That was funny lol
Nothing is impossible, with a willing mind!
  • #18
  • Jan 17, 2013 11:58am Jan 17, 2013 11:58am
Quoting diceman555
dont take this the wrong way but that resembles a huge fart
http://www.reactiongifs.com/wp-conte...l_done_sir.gif
  • #19
  • Jan 18, 2013 2:38am Jan 18, 2013 2:38am
Quoting diceman555
certainly for me this is as close to getting percentage values for range,i use a fractal indi ,not so much for entries but its the best thing ive found to conclude fractal breaks , undoubtedly they conflict as you change the time frame.on a 1 min chart range on average would be much greater than trend,for sure over 70 %.
If you take timeframes out of the picture, you're only left with price. This simplifies things a lot.
This is what I did when developing my own automated strategies... instead of time-based bars, I used price-based bars.
Eg. if price moves 20 pips up or down, a new bar is made. Then it's just a matter of choosing whether to trade bars with small or big values (or a combination), and whether to follow the direction of the bars (trending) or not (ranging).
I backtested these with tick data from years 2008-2009 and came to the conclusion that the market shifts from trending to ranging unpredictably and couldn't find any parameters that would give a consistant profit over the time period. Well, atleast I tried.
What I did find though, is that the forex market has a lot of high-frequency noise, but it's impossible to gain profit from that due to the spread. I guess the only way to make money from that would be to become a market maker, no need to worry about the spread anymore as you control it!
  • #20
  • Edited 11:20am Jan 18, 2013 10:50am | Edited 11:20am
Based upon responses so far, I'm going to go with the assumption that a good portion of these trending percentages are nothing more than high-level estimates based upon the imperfect science known as the "eye test". That is not too surprising I guess.

Now, judging by the lack of interest in this first Forex Reality Tour topic, I'm hesitant to continue on with more topics. Some other possibilities are:

95% of traders lose money
Always trade with the higher timeframe trend
Automated trading cannot be long term profitable
Basket charts have less noise than single-pair charts
Managing losing trades can't be profitable
Trading on smaller timeframe is just about impossible
Indicators are all lagging
All indicators are useless

Most of these subjects have been beat to death, regardless of which "side of the aisle" you sit on.

I'd really like to have a nice discussion about the use of the words "loose" and "lose". I'll just say this...I've never had a "loosing" trade in all my years of trading.

Or how about a discussion about the proper use of quote tags in a post.

I'll spare us all that agony...back to sidelines for me.

saulimus - I've used range bars in my automated system for almost 3 years now. They haven't let me down yet! But, then again, I thought automated trading cannot be profitable. LOL!
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