The finest in trend trading - DEBUNKED

[jaquille]

if trends didnt exist we wouldnt be argueing about them right now. the word trend was created to show exactly what they represent. this is the same for fashion. once in a while you will see someone stuck in the 80s. you were correct in your first 3 sentences. simply because something is relative does not mean it doesnt exist. how can that even make sense? its relative therefore it doesnt exist? ur talking nonsense right now and i really dont get what your saying. ur right in the fact that trends, all over the globe, in financial markets or fashion or anything else, are all relative, but, they all exist. if they didnt exist they wouldnt be called trends. if a wall was relative would you say it didnt exist? according to what you just said you would so go find a relative wall and trying walking through it, better yet try running through it LOL.

i think you need to change you arguement to “trends are relative” instead of “trends are relative therefore they dont exist”

Actually, there is space in a wall. And certain things can penetrate a wall like SOUND! But that’s way off topic, even though I did broach the subject of quantum physics.

Actually, your argument “if trends didn’t exist we wouldn’t be arguing about them” can be extended ABSURDUM to include Santa Claus, the Easter Bunny, the Tooth Fairy, Big Foot, Unicorns and God. If they didn’t exist we wouldn’t be arguing about them. Based on your logic all 6 exist. Once again, let us be careful to be precise in our use of language.

Let’s look at “trend” from another angle… if trend exists, can you tell me where “trend” exists in the moment and where it will end precisely? If you can’t then how can you use “trend” to profit?

[jaquille]

Is the “trend” down? Does that me we should trade short? For how long should we trade short?

[jaquille]

Was that your final answer? Or do you want to make that lifeline call now?

[jaquille]

Doesn’t the fact that “trend” is discussed as short term, medium term and long term make it suspect? Short is what? How short is short? How long is long? Talk about relativity!

[jaquille]

The shaded area is between the 2 day highest high and 2 day lowest low (not including the current day). If price hits one of these lines, it is a break out trade. It will either be a winner or a loser. No one knows in advance. Based on statistics, this trade can be profitable.

There can be no debate( given we use the same data ) on where the lines should be placed. The 2 day highest high and 2 day lowest low are absolute and not relative. They are also time frame independent. This makes them real as opposed to conceptual. Though one can argue time is both conceptual and relative thus making the lines relative, but that’s back to quantum physics and beyond the scope of this thread and forum for that matter.

[jaquille]

@Aarnog

A trend in a given timeframe is:

A price sequence heading from a significant point (which we will call point A), to a second significant point (which we will call point B), with point B being greater than point A for an uptrend, and lower than point A for a downtrend.

A significant point (as would be found at point A or point B), would be the point at which price reached its lowest low, or highest high. To illustrate my point, a picture!

As you can hopefully see, there are a whole bunch of circles on this picture. The three red ones are, for this selected timeframe, the highest highs, and the lowest lows (the “significant points” I was talking about). If you look at the candles to the immediate left and the immediate right of the highest point, you can see that both of those candles are either EXACTLY equal to, or lower than it is. If you look at the lowest points, you can see that the candles to its immediate right and its immediate left are EXACTLY equal to or higher than it is. This is what makes a point significant.

We also have minor significant points in between the major ones - identified by the little black circles. Each of these fills the criteria of a significant point, and indeed each one creates its own minor trend (usually just a few candles, 5-10 or so), but none of them signal as great a trend change as the significant points circled in red.

So, to kind of sum things up nicely:

A trend is a line drawn from the one significant point, to the next consecutive significant point, as it is impossible for two significant highs to occur without a significant low between then, and vice-versa. But, there are two different trends; which I will call “major” and “minor” trends.

Major trends are trends drawn between two VERY significant points (those would be the points I have circled in red). There will be many periods between these two points (probably 30+, I haven’t done any research whatsoever into this though, so don’t take my numbers as gospel)

Minor trends are basically any retracement that last longer than one period (one candle on my charts, because I trade candlesticks). They will only last for a few candles before continuing in the direction of the major trend (less than 30 candles, most likely between 5-10. Again, I’m just making these numbers up, I don’t really know).

I hope that’s clear for everyone. Now, to Tymen’s questions!

1. What about retracements?
   Retracements are basically mini-trends that occuring in the opposite direction of a major trend. If you can identify the retracement points, you could probably trade them as you would a regular trend.

2. How many candles allowed in a retracement?
   This depends entirely on how many candles are in your trend! If you have a 30-40 candle trend, a retracement of 5-6 candles would be huge, but if you’ve got a 300-400 candle trend, a 5-6 candle retracement would be nothing more than a bump on the road.

I’d probably say that if the retracement lasts more than 1-2% of the length of the trend, it is probably a fairly tradeable trend reversal. I don’t have any evidence to back me up on this though.

3. How big is a retracement allowed to be?
   A retracement can be as big as it wants - you have no control over it! (Man, am I ever funny.)

But in all seriousness, this depends on your risk tolerance and the size of the trend. If you’re expecting to get 1000 pips out of the trend, then a 30-40 pip retracement probably won’t bother you that much. If you expect to get 100 pips out of it, you might have to jump out if it retraces by 30-40 pips.

4. Consider trendlines.
   Lines drawn from one significant point, to the next consecutive one!

5. What could constitute the begin of a trend?
   A significant point, as defined earlier in my post

6. What could constitute the end of a trend?
   A significant point, as defined earlier in my post!

Hopefully there aren’t too many holes in my definition!

Is "trend’ really your friend?

[jaquille]

Which way should I trade if I want to trade with the trend?

[Master_Tang]

Which way should I trade if I want to trade with the trend?

The answer to that question is another question.

How long do you want to be in the trade?

[wrtm_19]

I understand you use daily data, am I right?

[system]

There can be no debate( given we use the same data ) on [B]where the lines should be placed[/B]. The 2 day highest high and 2 day lowest low are absolute and not relative. They are also time frame independent. This makes them real as opposed to conceptual.

And no opinion about it.
Because the 2 day highest high and 2 day lowest low are an expression of price.

Price does not know trend.
Price goes up and down.
No more.

[simbafx]

Don’t you realize every time you win it is luck?

I agree 100% that trend is an arbitary concept, but its still a useful concept nevertheless. Take a bunch of completey random entries and retrospectively assess them against a longer timeframe trend. You’ll probably find that up to 80% of the winning trades where taken in the same direction as the longer term trend, and 80% of the losing trades where against trend. If your smart enough to be able to define the longer term trend in real time (and even the most basic TA will allow you make a reasonable estimate) then if your sensible about trade management and postion sizing, thats a licence to print money without even getting smart about identifying an entry trigger.

Lets also not forget that markets have a tendancy to move further and for longer than simple probability theory suggests (and this happens in nearly any arbitary timeframe that you care to analyse). Its the behaviour of market particpants that lead to this phenomena.

Markets can be predicted at least within a statistical framework and there are basic techniques that can certainly contribute to an edge. Having said that, I do think that your belief that he outcome of a single trade is down to luck is a tremendously useful concept. It is possible that a single market participant placing a trade can result in you experiencing a gain or loss. That particpant may not even be making the trade for speculative reasons.

You’ll probably take a great deal of critisism for suggesting this, but its an extremely useful viewpoint simply because if you choose to accept that reality, it starts to focus attention on whats actually important.

[TalonD]

could you use some kind of linear curve fitting formula? Along with some method of determining slope to guage strength of trend?

I keep an open mind. And reading both threads with interest.
And used some curve fitting while studying primes. Got some interesting results while trying to come up with a formula for the Nth prime.

Trading should be about make money aka profit.

Agree with this completely!

And I don’t think Jaquille is extraction. Completely different personality.

[ThePhoenix]

ThePhoenix:

Don’t you realize every time you win it is luck? If you can’t control the outcome, it is luck. If you believe otherwise, you are deluding yourself. The market does not care what the reason is you entered a trade in a particular direction at a particular time with a particular position size. What happens after you enter your trade is out of your control. Your goal after you enter a trade is DAMAGE CONTROL until and unless the market moves in your favor giving you a chance to profit. The same pattern may appear in the market but what happens next is not guaranteed.

Having a winnning trade isn’t just luck, traders who are consistenlty profitable, like me, take trades they know have a set of probabilities in their favor.

Nothing happens exactly the same, but I can say from first hand experience that when I see x,y & z, with particular set ups, the probability of a good entry and a good trade is worth betting.

Do trades always work out to a winning trade? No, but more often than not, yes, in my case. That is part of trading, finding a method that puts probabilities in your favor. Then find good entrance and take profit points.

No, a trader does not control the market. YES a trader controls what happens after entrance. Not the market price movement, obviously, but how the trade is managed. Do, you hold on to a trade for a few weeks because a larger trend is on and you have a good entrance? Do you get get scared and get faked out early because of retrace and take less profit? So, what happens after your entrance is not out of your control.

For instance if I enter a trade thinking it’s a good entry and price reacts badly after entrace, then I may exit or move my SL to breakeven if I’m in profit. I know because of the way I enter it’s probable price will move in my favor quickly, if it doesn’t then I will re evaluate and maybe even exit if I come to the conclusion my guess where the market was going to go, from that point, was wrong.

You set your stop, and you decide where is the best place to take profit if you are winning.

And again, if trend trading is a myth and you have a better way to trade then please share it and make a real point.

[system]

[B]Markets can be predicted at least within a statistical framework[/B] and there are basic techniques that can certainly contribute to an edge.

[B]No One[/B] and I mean [B]No One[/B] can predict markets.

No statistical framework can change that.
What they can do is gauge probability & risk.
But that’s different.

This is one of the most difficult aspects of trading to accept.
Especially for new people & for people who conceptualize & intellectualize trading in their little compartments.

Trading can be as simple & as difficult you choose to make it.

You’ll probably take a great deal of critisism for suggesting this, [B]but its an extremely useful viewpoint[/B] simply because if you choose to accept that reality, it starts to [B]focus attention on whats actually important[/B].

I concur. It is long overdue.

[TalonD]

Trends aside for a moment. You guys have seen my daily hi lo thread where I am only looking at the high and low of the previous daily candle. But you have mentioned using the two day high and low. Is there an advantage to a two day verses a one day high low?

[jaquille]

I agree 100% that trend is an arbitary concept, but its still a useful concept nevertheless. Take a bunch of completey random entries and retrospectively assess them against a longer timeframe trend. You’ll probably find that up to 80% of the winning trades where taken in the same direction as the longer term trend, and 80% of the losing trades where against trend. If your smart enough to be able to define the longer term trend in real time (and even the most basic TA will allow you make a reasonable estimate) then if your sensible about trade management and postion sizing, thats a licence to print money without even getting smart about identifying an entry trigger.

Lets also not forget that markets have a tendancy to move further and for longer than simple probability theory suggests (and this happens in nearly any arbitary timeframe that you care to analyse). Its the behaviour of market particpants that lead to this phenomena.

Markets can be predicted at least within a statistical framework and there are basic techniques that can certainly contribute to an edge. Having said that, I do think that your belief that he outcome of a single trade is down to luck is a tremendously useful concept. It is possible that a single market participant placing a trade can result in you experiencing a gain or loss. That particpant may not even be making the trade for speculative reasons.

You’ll probably take a great deal of critisism for suggesting this, but its an extremely useful viewpoint simply because if you choose to accept that reality, it starts to focus attention on whats actually important.

This is not my original thought. I found it while studying.

[jaquille]

I understand you use daily data, am I right?

To calculate the high and low of the day, time frame doesn’t matter because the answer will (should) always be the same.

[jaquille]

And no opinion about it.
Because the 2 day highest high and 2 day lowest low are an expression of price.

Price does not know trend.
Price goes up and down.
No more.

Statements of fact.

[wrtm_19]

To calculate the high and low of the day, time frame doesn’t matter because the answer will (should) always be the same.

You are using a daily timeframe wether you use the timeframe concept or not.

[jaquille]

Having a winnning trade isn’t just luck, traders who are consistenlty profitable, like me, take trades they know have a set of probabilities in their favor.

Nothing happens exactly the same, but I can say from first hand experience that when I see x,y & z, with particular set ups, the probability of a good entry and a good trade is worth betting.

Do trades always work out to a winning trade? No, but more often than not, yes, in my case. That is part of trading, finding a method that puts probabilities in your favor. Then find good entrance and take profit points.

No, a trader does not control the market. YES a trader controls what happens after entrance. Not the market price movement, obviously, but how the trade is managed. Do, you hold on to a trade for a few weeks because a larger trend is on and you have a good entrance? Do you get get scared and get faked out early because of retrace and take less profit? So, what happens after your entrance is not out of your control.

For instance if I enter a trade thinking it’s a good entry and price reacts badly after entrace, then I may exit or move my SL to breakeven if I’m in profit. I know because of the way I enter it’s probable price will move in my favor quickly, if it doesn’t then I will re evaluate and maybe even exit if I come to the conclusion my guess where the market was going to go, from that point, was wrong.

You set your stop, and you decide where is the best place to take profit if you are winning.

And again, if trend trading is a myth and you have a better way to trade then please share it and make a real point.

Luck is defined as getting a favorable outcome when you have NO CONTROL over the outcome.

Yes, you can have the statistics in your favor when you enter a trade but that does not mean the next [B]N[/B] trades will not go against you. You enter based on statistics but favorable outcomes are due to luck.

This does not imply that coin flipping is as good as using statistics that are in your favor. On the contrary, it implies you should use statistics that are in your favor because favorable outcomes are based on luck. That is how you put luck on your side.