The finest in trend trading

IMHO i think that a move to a higher TF would help with the major trend and to a lower TF for the minor trends

Thank you for your input [B]kockneerebel[/B] :slight_smile: :slight_smile:

And also a great thanks to you for keeping the candlestick threads intact while I was away on holidays.
You did a superb job!! :slight_smile:

Now you have introduced 2 timeframes in the definition.
We need to have a universal definition for one timeframe, then we can simply refer it to any timeframe we want.

[U][B]Suggestion[/B][/U]

[B]A trend in a given timeframe isā€¦[/B]

Lets keep on trying!! :wink:

It looks like an up trend apart from the yellow bits. The high point in the second yellow part could be a lower high in a down trend on a higher time frame. I wouldnā€™t like to make a guess either way on that chart alone.

now iĀ“m very curious tymen. if you will present us a definition of trend that is an absolut truth it will be very usefulllā€¦ hope to see it soon

this guess game is fun

well i guess a trend in a given TF can be a single candle in a higher TF

Thank you again [B]Ruilima22[/B]. :slight_smile:

Yes, I will certainly work towards that.
However, this thread is only in its infancy being only one day old. :eek:

I was really looking for much more input since I know from teaching that the best way to learn is to provide input such as what you are doing. :slight_smile:

well i guess a trend in a given TF can be a single candle in a higher TF

True, but now we are no longer trading a trend.

[B]Hint[/B]

[B]Honorary FX Member, Tonymand[/B], in agreement with others has given a gem of a contributionā€¦higher highs and lower lows.

This is a great general statement, but not detailed enough for our trading purposes.
However, we would do well to continue working with that contribution as a base framework!! :slight_smile:

[U]Refinements neededā€¦[/U]

  1. What about retracements?

  2. How many candles allowed in a retracement?

  3. How big is a retracement allowed to be?

  4. Consider trendlines.

  5. What could constitute the begin of a trend?

  6. What could constitute the end of a trend?

Lets keep tryingā€¦

[B]A trend in a given timeframe isā€¦[/B]

[B]It is now midnight here and I shall stop my own input till tomorrow.[/B]

This thread has only just started being one day old. :cool:

I especially look forward to input by our other [B]Honorary FX Members[/B] and pending [B]FX Members[/B] and other veteran traders. :wink:

Everyoneā€™s input is valuable. :slight_smile:

So keep posting!!

I will be here again tomorrow to clarify things. :slight_smile:

well tymenā€¦ i always had heard that a good teacher is a teacher who knows to ask great questionsā€¦

those 6 questions posted by you are very good and i canĀ“t aswer to any:(
if this thread give the aswer to those questions it will be one of the most important threads everyone can readā€¦

iĀ“m very interested on thisā€¦ higher lows and lower highs is the only thing i use in trading and know how to aswer those questions will be very usefull

I am thinking that an up trend begins with the lowest low and ends with the highest high

well but how can you know wich one of the lows is the lowest??? or wich one of the highs is the highest??? a trend can be very clear after it is formed and endedā€¦ but spot it during the trend move is not easyā€¦

Price has fractal like characteristics. Self similarity at all scales. Or at least it seems to. I dont know if that observation has any usefulness in an objective definition of trend. Probably not. But itā€™s something that keeps rolling around in the back of my mind.

Good to see you back Tymen with some thoughtful stuff to work with. I am watching this thread with great interest.

Regards,
Muthu.

Iā€™m thinking here of trend corrections, that themselves brake the main trend structure, but at the end they resume the prior movement up/down.

You know, some sort of elliot wave structures.

Hereā€™s my attempt:

A trend is defined as a period of higher highs or lower lows for a given timeframe with minimal retracements of less than 50% of the total directional move, whether in the positive (+ pips) or negative (- pips) direction.

Input appreciated and thanks Tymen this thread is shaping up to be EXCELLENT.

OK heres my attempt, how about,
An upward trend is when the average highs are higher than the average lows in any given time period and vice versa for a downward trend.

Wow, very informative, you did a great job here Sir!
I agree that learning via pictures is the best. One day I will put together a complete tutorial (when I have made lots of $$$ and can retire on a beach :P)

I wrote an article about forexhabits.com/why-i-dont-trade-against-the-trend

I dont want to spam so if needs be ill take the link down, just thought it can help some people.

Cheers
Diggy

Maybe after ā€œXā€ amount of lower highs during an uptrend a retracement is occuring which may lead into lower lows or a downtrend? As for how long a retracement should last I really have no idea. Maybe we could treat each retracement as its own trend? At the end of each trend (signified by lower highs in a bull martket or higher lows in a bear market) we look for the trend to reverse? So the end of the previous trend would infact me the begining of a new trend?

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

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 ā€œsignificant pointsā€ 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 ā€œmajorā€ and ā€œminorā€ 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 havenā€™t done any research whatsoever into this though, so donā€™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, Iā€™m just making these numbers up, I donā€™t really know).

I hope thatā€™s clear for everyone. Now, to Tymenā€™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 youā€™ve got a 300-400 candle trend, a 5-6 candle retracement would be nothing more than a bump on the road.

Iā€™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 donā€™t have any evidence to back me up on this though.

  1. 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 youā€™re expecting to get 1000 pips out of the trend, then a 30-40 pip retracement probably wonā€™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.

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

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

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

Hopefully there arenā€™t too many holes in my definition!

I ignore sideways trends because

A: you canā€™t earn pips off of them (by definition), and

B: perfect sideways trends (where close price = open price for more than a couple of candles) pretty much donā€™t exist. There will almost always be increases or decreases in price (maybe by only 1 or 2 pips, but thatā€™s still not a perfect sideways movement), and those increases and decreases can be used to make profit.