Hi everyone i am super new here, i have some prior experience with Forex…but i am horrible with figuring out/adapting to Trend changing into Range and Range switching back into Trend…what i am trying to do is see if there are ways that i can do this better.
So quick description------
Basically i have this guard which is a trend guard, only will buy up when up trend and buy down when down trend…it seems to work well, but the bad thing happens when a trend finishes…then i am stuck…i simply can not tell when Range starts and i have a trade opened, and it would hit a stop loss…then because i can’t tell when the Range will finish…if i don’t buy and only when a trend properly emerge then it is way too late…and if i keep trading i keep hitting stop loss because of the Range…
I only take positions with trends, I don’t trade ranges. I’m not saying it can’t be done, but better traders than I am say that its much better to trade the way that best follows your character, as its hard to jump from one style to another.
That said, I found it very helpful when I see an uptrend on the chart, to ask myself what do I see that makes me think this is an uptrend? Of course, price is going up. But that allows other questions -
How long has price been going up?
How much has price gone up in the last 10 days?
Has it been going up steadily or in 1 or 2 huge jumps?
Did it have major pull-backs that cut through the trend?
How long ago was the last major pull-back?
How deep was it?
Add a MA -
Is the MA sloping upwards?
Is price above the MA?
How long has price been above the MA?
Has the MA cut through recent price bars?
How many closes have there been above the MA?
Add a second MA
etc. etc. etc.
Decide what you need to see in an uptrend in order to buy it. This thinking also allows you to look at 2 or 3 or 20 uptrends and see which is the best for your trading strategy.
Obviously, if you don’t see all or enough of the criteria you have decided, its not a trend you want to trade.
Thanks for the advice, i will take a look at the MA, i had been using MACD to determine trend…and it worked fine for some times and doesn’t when it oscillates. I use it when its -ve to determine its dropping and +ve when rising etc…but the signal was a bit too overwhelming sometimes.
I tried using MA once or twice, i wasn’t good at it because when a MA crosses, and i enter into a trend it seems like my entry was already late…i think i will just have to test it out.
I like what Tommor said about the moving average. To expand on that, it is common for traders to take a long position when price is above the moving average and take a short position when price is below the moving average. But that usually is not enough. You need more information- a confluence of information.
Here is one idea. If you suspect a bear trend reversal into a bull trend, wait for a higher low to form. In addition, look for a very strong bull candle to break out and close above the moving average. If you are still unsure, welcome to the club. A lot of traders wait for confirmation in the form of a second strong bull candle to form before putting in an order to go long.
Will price pull back at this point? Maybe, maybe not. If it does, it probably won’t pull back much. When you see that second confirmation candle, you have to use any excuse to get long. I don’t normally use market orders, but when I see a large bull spike forming, I am on it quickly with that market order. I certainly don’t want to get trapped out of a big move.
Incidentally, your stop is going to be placed just below that new lower high. Which means it could be far away. Adjust your position size to your normal risk tolerance. You may have to trade smaller than usual, but it will be well worth it if you can hold to a larger profit target.
If you are unsure about how to find lows and highs of a trend, go to the babypips school and review the entire section on trends. Well worth your time.
MA crosses as entry signals are always late. MA’s are good for trend confirmation and trend strength judgements. As steve says, you need more information for a good trade. The most timely and valuable information is price.
I often look to get into a long position as price makes a close above the short period MA: the long period MA might still be in the wrong order in the sequence, or it might be sloping downwards or running flat. But if other criteria from recent price action are positive, its worth the risk.
PS: Don’t fear the end of a trend. Decide in advance what criteria would get you out if the trend weakens. Then, if you’re long in an uptrend and price falls to a level or TA formation that you have pre-determined will be your exit signal, get out instantly.
Having done that, you have put some profit in the bank and reduced your capital risk to zero. However, keep watching the chart for signs that the trend is resuming: if it gives a resumption signal, again, pre-determined, then get back in. Sometimes you will be able to re-enter at a lower price than where you exited but that shouldn’t be a specific requirement.
Through all this, the important stage is the planning. I find it unnecessary to ever enter a trade live, they’re all order-driven. I know in advance what TA would get me into a trade - not because I can predict the future but because I have decided what I would need to see on the chart in order to accept the risk of being wrong. You can’t know what the market will do, but you must know what you will do.
PPS:
Although we both talk of MA cross-overs being late signals, they are not necessarily the last signals on a trend, its just that they are too late to signal the start of it. But there are always places to sensibly get in later as the trend continues. Let’s face it, that’s what trends do, they continue. That’s why they’re trends.
So, e.g. Rayner Teo will tell you to get into an uptrend when there is a close above the 20EMA. But he also says get in or enlarge your position if a price bar is pierced by the 20EMA but again, the close is above it. His is not a magic signal there are countless other ways of doing this. But work out what signals you will look for and how strong they need to be before they print.
Don’t be too quick to dismiss the humble MA cross-over pattern.
Look at the charts for the major pairs for the last 6 months. Mark as a buy the first close above the 20EMA after it has crossed above the 50EMA. Its usually the same day. Most of these led to significant price rises. Likewise for the bearish cross-overs.
The problem is more to do with how low to place your stop-loss so that the price volatility of the first few days doesn’t take you out. 2 ATR14 might be a rough and ready guide.
Guys Thanks so much for the info!!! Really appreciate it! I will definitely try it out. I had that worry before because i used to use MACD +ve/-ve as the trend signal which gave me waaaaay to many signals when it enters Range. And when i switch over to Long MA because of the slight delay then my profit drops… So i was in that weird dilemma.
I will def put the price break and the shorter MA to test in my system. Guys thanks again!
I had been trying to use the MA and with entry trigger etc…some weeks its good, but i am still struggling haha. I am trying to gauge if my target is too crazy… i think it isn’t? My goal is about 1-1.2% per week, but the main goal is consistency. Does it sound like an achievable target? its 0.2-0.25% per day.
At 1 specific week i have managed to catch 1.8%, then the same system that i had been using gave me -1.2% the next…
I’ve never in my life calculated a % win/loss per day or per week. Consistency is my continuous aim, but I mean consistency in what I do. Its far more important.