Determining Trend Using Price Alone

Hello,

What method do you use to determine the overall trend of a currency pair? What timeframe?

For example, is the GBPUSD in a downtrend right now, or is it in a correction from the previous uptrend? (I'm sure BOTH is the correct answer, but how does that help me trade with the trend?)

Just want to TRADE WITH THE TREND.

Any help would be greatly appreciated.

best,
forexpips

Any thoughts?

Hello,

The question you must ask yourself is what timeframe will I be trading? I see you used a 4 hr chart. Take a look at the 4hr chart for several months back . Try changing from candlesticks or bars to a price line. See if you can determine a perspective on price from that.

Lou

I'm trying to make myself look at the weekly BEFORE I consider a trade.
Then if the daily trend matches the weekly I start looking for opportunities.
If I'm unsure because of an imbalance between those two I might check the monthly, but my rule is going to be match those two.
It probably depends on the timeframe you normally trade, the shorter TFs may not depend on daily/weekly as much because you'll be in and out of the market quicker.
Most experienced traders that I've read tend to work down from long TFs until they get to their normal trading TF.
Vague I know but there it is.
Peter

I use MACD crosses on the 4 hour chart to help me determine price direction. I know, I know, it's a lagging indicator, but that is precisely why I like it, because I always assume the movement of price will continue once it is established.

Its also important to be consistent with the timeframe you use to establish price direction. You will only confuse yourself if you use too many timeframes.

That chart you showed was trending downward imo. If you want to trade with the trend, then you need to short your pair(i think it was gbpusd). BUT, you have to place appropriate stop loss orders which vary greatly depending on what time frame you are trading in.
For example, I like to trade the gbpusd from a 15 minute chart and it must be trending on that chart for me to place a trade. i usually use a 25 pip stop loss.
but if i place an order based on a daily chart and used a 25 pip stop loss, i think i would get stopped out on almost every trade. i am curious if anyone can comment on their stop loss amounts if they trade off of the daily chart.

anyway, i suggest trade within the time frame you analyze from. if the gbpusd has been bullish for 2 months on the day chart, but trending down on the 15 minute chart..... that day chart does not help you much.

I believe Einstein has a theory about objects in motion tend to stay in motion........

4 Hour GBP/USD with V3 is my vibe.

Are you talking about the vegas wealth builder no.3, or the vegas tunnel fibs set up?

That's just what I believe Forexpips' chart to be.

4H Cable with Vegas DTM Model #3.

trend, just like any other TA, is subject to human interpretation. 2 price bars can make a trend, so does 20 price bars. Investors from different time horizon with different objectives are interacting with each other, do you really think there is a universal thing called "trend". For yearly trader, 100 pips is nothing to them. but 100 pips loss for 15 minutes trader will be disastrous. So it is totally irrelevant that you gauge the long term trend, and trade the short term frame. Fact, it does not work. stick with your time frame, and trade the price. simple as that. You would have made money if you buy cable after it stabalizes in the afternoon, regarldess the trend is down. price should be your only concern.
For example, Cable has been going down for 4 days in a row, if you just stop listening to all the retracement, trend is your friend mumble jumble, and trade the price, you will make shit load of money during these four days. If you are interested, I can now tell you all you needed to know about TA for cable , trendline, FIB, indicators, Ewave, but does that help you? At the end,TA will tell you that it will either go up and down.

Here is a simple and dumb ass strategy many pit traders use. if you have just shorted the open, and trail your stop at each day's high. you will have 4 contracts that has gained about total 800 pips.

One thing we hear often is "The Market Is Ranging" or "There Is No Trend".

As a post above mentioned i think it is important to analyze the time frame you wish to trade. In last summer's ranging market i know one group of traders, trading a fairly simple system, that could show you trade after trade that were successful for anywhere from 50 to 150 pips or more, that most would have to admit when they looked at the TF just one or two steps above was untradable according to their own entry rules and was ranging. . . Then when you look at what this group's chart is, you realize you've zoomed all the way out on a 5 minute chart and just saw the last 3 to 6 hours worth of candles in a down trend. For those on higher TF charts they would not have known which way to go in most of these trade situations. Although on the 30m or 5m TF the entry rules were clearly initiated and the trend was sustained long enough to bank profits. Amongst these traders there were reports of doubling and even trippling of one's trading account over the summer working off the STF charts with a consistent plan. Sheesh, one of them is a housewife with kids at home that took her tiny $500 micro, and remaining in MM rules of the model, took it to well over $2K by summer's end. Tell her there was not "trend" this summer and she will show you her charts. (PS the reason i mention this one woman is that she had a whole lot going on in her life being a wife, mom, homemaker and everything else. Yet she was able to put out some serrious time to learn a system and trade by it's rules.)

So i think it is all relative. I think Einstein said that too ; )

Often the most overlooked and useful trend indicator and trade entry method is lines. The first thing I like to do when looking at a new chart is to draw horizontal S/R lines and every trendline I can see to get a feel for what is currently happening. It is a rather remarkable and eye-opening exercise to trade for a while using nothing more than lines and candlestick charts. You really don't need anything else. Sure, I like to use divergence indicators to give some trades more surety and weight, but a thorough study of charts with lines will bring you back to the heart of trading...buy low/sell high...trade where the market is going...don't predict...just follow along.

Liz

i like to use daily and weekly charts, along with trendlines (which shouldn't really be needed to tell a trend). you should be able to see a definite up down or sideways if you take a couple steps back from your monitor.

I think there might be a reversal the next week, maybe even on Sunday Asia. A descending flag formation can be seen on today's chart whereas there were two ascending flags on the two previous days.

Hi FP,

Don’t trade with the trend<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o></o>

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The question of what methods to use to determine a trend is a good one, but first you must understand that the market is not trending most of the time. The other thing is that a trend will show up differently on different pairs.<o></o>

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I like to say that learning price behavior is more important than finding the trend. There are a lot of opportunities to trade outside of a trend. Each pair has its own way of behaving. Learn how each pair that you trade tends to behave. Of course, the way most of us trade a 400 pips move in 4 days on any pair is a trend. Knowing when to hop on for the ride is the trick. That's why I say learning price behavior is vital.

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I use a PIPS indicator which stands for Price Intensity Projection System(copyright 2006 Mark Olivero). This is a way of entering the last 2 to 10 days news events, both data and geo-political, are getting an idea of near term intensity of price movement. This works best on the H1 up to the Daily charts. The output for this can at times show direction, but mostly it shows the strength of the direction. This is one big component of price behavior. This type of system is different that other oscillators like RSI or MACD. If a PIPS indicator is strong then there is a greater probability of a sustained direction and if the PIPS indicator is weak then there is a greater probability of undetermined direction (which is a good opportunity for hedging). The PIPS indicator is something I am currently developing, hopeful that gives you an idea of what to look for. Note: It is important to learn in forex the difference between probabilities and possibilities. Much is possible, but less is probable.<o></o>

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So I would say the best thing you could do is learn how price behaves with the pairs you trade. Keep a journal of everything you learn by writing down brief lists of what you observe. You will learn the most from your loses. Hopefully, the more you trade the more you will learn.<o></o>

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May your pips have grandchildren.<o></o>

Well... it would be a sin if I didn't comment on this thread.

Peter mentioned it already, but trend is relative. I see trends on all timeframes.

A lot of traders are anti-trend traders. Which is silly, because whether they know it or not, they usually are trading because of a trend, unless they're just a scalper. But scalpers are trend traders worse enemy anyway, in the arena of Traderdom, because they ruin currency pairs. If you don't believe me, just compare the EURUSD when it first came out to now. Scalpers have literally created a whipsaw effect...it's a horrible instrument to trade. Scalpers also love it because of the low spreads...

I would recommend looking at yourself to determine what timeframe you want to trade. Are you a swing trader? (3-5 days in a trade), a day trader, or what?

In your example, I wouldn't trade the GBPUSD right now, because I don't know what trend it is in. It just broke an uptrend and is straight down. I want to see it pullback, then plunge again before I enter a trade with my system. Also, I like to see that happen a couple of times where I have three peaks and valleys... that's a nice trend and is reliable.

So it's wise to look at a few different pairs for opportunities.

I like 55 minute timeframes and I use a 377 minute as my deciding factor of where the trend is heading. If it's ranging, I don't trade it.

A lot of traders do not realize this, but the best trend is a sideways trend, also known as no trend, ranging market, chop, congestion, consolidation, whipsaw. It is the best out of trends because you know where to enter and exit based on approximate supports and resistances. According to the Dow theory the markets are always in a trend. It can be a microtrend, still it is a trend. Sideways trend is just a series of short-sized and lived up and downtrends.

I'm sorry, but what is wrong with a 24hour SMA.

ie 48SMA on a 30min, or 288SMA on a 5min.

If the Market is below 24hour, and especially if the 24hour is pointed down, then favour shorts., short near and take profit near Envelope Same SMA, Dev .6% on the GBP, or approx 110pips away from the 24hour SMA.


Pic attached.

why make it more complicated ???

p.s. you can back test this for YEARS !!!

a sideways trend can go up down or sideways. an uptrend however, after a short correction, will most likely go up.. a downtrend will most likely go back down, imo i like those odds better. don't get me wrong breakouts can be a good way to trade as well, but not as effectively as trend trading.

Don't worry about the Trend changing on you, thats what you've got stops for, the odds are the Trend will sustain, play it and no fear over all you'll make good $$$$.s


Shame all the 24hour hits where like 5am GMT time though, for my entrys