Best Indicator for gauging strength of any current trend?

I have been as of late enamored with the idea of naked trend trading, using pure price action (with no indicators) to “pyramid” trades off peaks and valleys in the direction of longer term trends. I have been considering working off the daily and 4 hour charts.

Now, the “holy grail” that most people ask for is an indicator that can tell them when price [I]changes[/I] direction under certain conditions. This is almost impossible to determine and a central flaw of trading by indicators, in my opinion.

However, I am interested to know if there is any one (or more) truly reliable indicator to measure the strength of a given trend [I]already under way[/I]. I have looked at a few options, including: ADX, Ichimoku, Aroon and the McGinley Dynamic. It seems most people still believe the ADX is the best such indicator.

Your thoughts?


		John (Merchantprince)

[I]“Nobody can be exactly like me. Even I have trouble doing it.”[/I]

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The McGinley Dynamic might as well be a 13 period exponential MA on the open setting.

The rest of them are greek to me. Dunno what they do for the most part.

Yeah, I included that one since I recently read an article wherein McGinley stated you could adjust it’s default values to make it more of a trend-strength indicator. They are ALL greek to me. :wink:

Personally I just use PA and a few forms of S/R such as fibs pivots whole numbers and of course the basic s/r. I don’t use any indicators at all for guaging the strength of a trend. Just plot what I mentioned earlier and you will see how price reacts at these levels when 2 or more are near each other.

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Merchantprince

Early in Tymen’s “finest trend” thread (post #67 to #70) “[B]tonymand” [/B]posted some great diagrams on “dow theory”. If you study the concept and apply it to the longer time frams ie: 1h, 4 h ,daily, and weekly, I think you can get a real good idea for when a trend is building up steam or losing ground.

I’d love to see a naked trading thread based on “dow theory” and other “old school” methods.:slight_smile:

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d-pip, I actually read more than one thread over the past weekend that relies on charting price action pretty much the way you describe. Have you read the Law of Charts PDF? It’s been referenced a number of times in naked trend trading threads and is basically the “dow theory” illustraded in your reply, explained in greater detail and with several pages of chart examples.

What I’m leaning towards right now is setting up 4-hour charts for all my pairs and using a stock ADX indicator, taking any signal above 25 that a strong trend is underway, as explained here:

ADX: The Trend Strength Indicator

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Focus one or two pairs maximum, you do not need 12 pairs to make profit. I trade just gbpusd and on Thursday last week I made 24% while risking 2% per trade. Last week was a very good week but understand it is better for you to just grasp the concept on one pair and spread to others if you need to. I could apply what I do to every pair, but I don’t because that would be too time consuming plus I make plenty off of just one pair. Also don’t forget the 1 hour charts and the daily.

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Merchantprice,

I haven’t seen the “Law of Charts” PDF, can you point me in the right direction to find it?

thanks!

PS You might want to take a look at the #1 post of R Carter’s “Advanced Trend Line Trading with SSD” thread. He used 4h charts with the slow stochastic set to 10:4:2. It seems to do a nice job of showing over bought & over sold.

http://forums.babypips.com/free-forex-trading-systems/30099-advanced-trend-line-trading-ssd-5.html#post140823

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I’ve attached my copy of the Law of Charts to this post. In fact, I’ve spent most of this afternoon reading over it and trying to grasp it all.

That link for RCs thread is interesting and quite similar to what I am studying. I wonder if he still trades that system?

Law_of_Charts.pdf (187 KB)

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thanks for the PDF, looks good! :slight_smile:

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I would define “strength” as how long price is likely to continue in a given direction (Long or Short) relative to the timeframe of the chart in question.

Well, thank you for all your help, TRO.

May I put the cat amongst the pidgin and suggets that the best trend indicator is hindsight! :slight_smile:

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ADX/DMI system is quit reliable and complete. But lags.

ADX is the best, I agree. It lags because it doesnt give you an entry for buying/selling but it does confirm whether the trend is strong or weak. There are many custom indicators on it in the MT4 platform

apparently, Dr Elders Force indicator is a very reliable one.

Thank you for the Law of Charts pdf.

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I like to see ADX > 35, just my preference.

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Thanks! good thing with the pdf!

I use ADX with speeds 7 , 21 , 42 , 89 and 144. (without dmi)
I enter a trade when 89 and 144 powers on and exit when 89 or 144 power off.
While 89 and 144 are on you can add positions when adx 7 powers on.
Simple!


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