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Beginner Questions
195

We have come to the end of all the detailed stuff I wanted to present.

It is now time to formulate that all encompassing Definition of a Trend.

[B]Before I do, lets revise our facts…[/B]

  1. uptrend - higher lows, downtrend - lower highs.

  2. trendlines with correct placement.

  3. trendline breaks giving hypothetical entry and exit points.

  4. efficient and inefficient trends.

  5. subtrends and individual retracement/forward candles - the fundamental building blocks of the trend.

  6. A lot of time is wasted in inefficient trends in trading retracements.

  7. Inefficient trends can be broken down into more efficient trends going in both directions.

  8. Only efficient trends produce quality entries and exits.

  9. It is better to exit an apparent trend termination and re-enter again rather than trade an inefficient trend.

[B]Now with that in mind the definition can be made…[/B]

only one thing…it is 1.00 am here and my bed calleth again!! :smiley: :smiley: :smiley:

So…yep!!..tomorrow!! :stuck_out_tongue:

1 Like
196

Great stuff Tymen, you deserve a rest. Sleep well

197

OK, the time has come to set the definition in concrete - well tentatively anyway since someone may come up with some better English to describe parts of it.

I am going to use the sub-routine model to write the definition.

sub routines are used in computer programs.
In this, the main variable is not calculated until the initial variabes are calculated first - here is an example…

a = b + c

and

b = x + y

and

c = k + (s*p)

In this case, “b” and “c” are calculated first, then substituted into the first equation to find “a”.

The same format will be used in my definition.

[B]So without further ado, the next post has my 1st edition of the definition of a trend…[/B]

198

[B]TOPIC 5
THE DEFINITION OF A TREND[/B]

[B]THE FIRST EDITION DEFINITION.[/B]

[B]If………[/B] [B]there is a sequence of forex price action in a given timeframe[/B]

[B]then…… [/B][B]there exists a TREND[/B]

[B]……. when the sequence consists of successive higher lows (uptrend) or lower highs (downtrend) generating a random sequence of subtrends, forward + retracement candles such that the sum of these is supported by a trendline of a given efficiency and bounded by a break in the trendline at each end.[/B]

where……

[B][U]a forward subtrend[/U] is 3 or more candles going in the same direction as the main trend,[/B]

and

[B][U]a retracement subtrend[/U] is 3 or more candles going against the direction of the main trend,[/B]

and

[B][U]forward candles[/U] are groups of 1or 2 candles not belonging to a forward subtrend,[/B]

and

[B][U]retracement candles[/U] are groups of 1or 2 candles not belonging to a retracement subtrend,[/B]

and

[B]a [U]trendline [/U]is a line drawn to show the trend (underneath for uptrends, above for downtrends,[/B]

and

[B]the [U]efficiency [/U]is the degree of objectivity in the placement of a trendline.[/B]

199

Well, with that definition in place (and I will give readers opportunity to have it modified to improve it), we can look at its advantages and then move on to the next topic.

  1. The definition serves as a benchmark with which we can check all that we now do. It becomes a measuring standard to check that we are really trading trends and what type of trend.

  2. The details of the definition serve to greatly increase our understanding of the nature of a trend.

200

Where is the definition of “main trend”?

201

Where is the definition of “forex price action”?

202

TOPIC 6
TREND TRADING WITH INDICATORS

There are different ways in which we can trade trends.
In this topic we will look at a trend trading method using indicators.

Now which indicator to use?? :confused:

Well, I am going to use a beauty - one that I have not seen used to date on this forum.

It is called the Guppy Multiple Moving Average after Darryl Guppy, Australian master trader who, I believe, first made use of it.

Here is an intoduction on this daily chart of EURO/USD >>>

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I call this indicator the Direction indicator because it clearly shows the direction of a trend.

But there is much more to this indicator than just that.

Firstly, what is it? :confused:

It consists of 2 groups of exponential moving averages being…

3,5,8,10,12,15 periods for the short blue ones.

30,35,40,45,50,60 periods for the long red ones.

The beauty of this indictor is that much more information can be found than just the crossover of 2 moving averages.

The true strength and character of a trend can be discovered using this indicator and I will show you how in the next set of posts.

203

There is much to know about using this indicator and I will show you step by step…

In this 30 MINUTE chart of USD/JPY >>>

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We see a weak and a strong trend.

In a strong trend, the red long averages are well spaced and moving up strongly.
The blue averages dip up and down but stay well away from the red ones.

Not only that, the spacing between the 2 groups is nearly as wide as the red group and the spacing is constant.

In the weak or fickle trend, the red averages are compressed and the blue averages have no trouble penetrating the red ones.

We stay away from trading when the red averages show a fickle trend. :eek:

204

In this 1 hour chart of USD/CHF, we see a parabolic uptrend that loses efficiency as we go up, then regains it at the end >>>

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Lets add the Direction indicator to it (GMMA - Guppy Multiple Moving Average)

NEXT POST

205

A powerful uptrend is revealed >>>

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The red averages are well spaced, going upwards with the blue averages well away from the red as the black space bars show. The distance between the blues and reds remains constant.

This constant separation distance shows a strong trend and is likely to continue.

Now look at the crossovers afte coming out of a weak downtrend.

The blue crossover is 1st with the red crossover 2nd.

Note that the crossovers are clean and neat.
This tells us that a good trend is coming.

206

Thank you for your post.

I suppose we could rename the word “trend” as “maintrend” if you like.

The forex price action is simply the price action on a chart.
This is obvious by inspection and does not need a definition.

207

Mr. Guppy

With a mustache like that, he must be smart. :smiley:

208

The chart says it all >>>

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The area on the left where the red averages are almost a single line is an area of no useful trend.
The area on the right where the red averages are well spaced depicts a powerful trend.

209

Wow, what a trend!!

And look how clearly the Direction indicator shows it on the chart!! >>>

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Even though the price action dips into the red averages at times, the red long term averages maintain their downward slope and their spacing apart.
This allows us to have confidence at the close of a candle that the downward trend will continue.

If the red long term averages started to turn upwards and also reduce the spacing between them we would caution.
If as well as this, the blue short term averages started to dip into the red ones, then we can expect the end of the trend.

210

That’s a very nice photo of Darryl Guppy you have posted [B]anonymousdave[/B] :slight_smile: :slight_smile:

It quite rightly belongs on this thread, since Darryl Guppy is the inventor of this Multiple Moving Average.

211

Following along a guppy template created. Mark Douglas says you have to have an edge. My question is what is the definable edge? What is the expectancy? Are these questions jumping the gun because you will be showing that information later?

Guppy indicators and template attached.

Guppy.zip (11.9 KB)

212

Where exactly is the entry and where exactly is it? Is it on the first chart or the second?

213

In this 1 hour chart of USD/CHF I have coloured the red long term averages to show the crossover point as the price action goes from up to down.
You can see the switchover in the averages before and after the crossover.

>>>>

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You can also see the blue averages crossover.

Both of these are clean, neat crossovers giving rise to a parabolic downtrend that is inefficient at first but becomes very efficient at the end, making for an easy exit.

Note that the blue crossover always occurs before the red crossover.

214

Yes, your questions are a little premature.
I am just starting to introduce the GMMA (Direction indicator).

Your questions will be answered as we go along. :slight_smile: :slight_smile:

Where exactly is the entry and where exactly is it? Is it on the first chart or the second?

Again, these questions will be answered as we proceed. :slight_smile: