The "trend"

[Carnegie123]

Hi there,

I have a question that ALL of the novices in trading ask themselves.
Is trading really that easy? Everybody is saying look for the lower lows or the higher highs etc…

But is it really THAT easy? I really don’t think so, and I am rather smart person that find new things easy to grasp.
However, on my path to cracking this ‘trading-code’ as I like to call it. I have found what it is that ‘disturbes’ my thoughts of the trend-is-your-friend concept.

I would like to blame it on SIGNIFICANT(LARGE) CORRECTIONS! :mad::mad:

The concept of lower highs and lower lows(and reverse) is skewed in a larger correction and therefore tricks us newbies to believe that the market has reversed direction.
If you do not understand what I mean, I will post a couple of pictures below.

Take a look at the first chart. I assume you all traded the EURUSD downtrend the couple of months. The picture is from that market.
Ok so look at the chart, it is the 4HR chart.

We have a thick red trendline moving down. Then we have a smaller trendline right on the price action.
What happens?
The price action breaks out of the smaller trendline. First it makes a low (marked with red - meaning STILL DOWNTREND), then it makes a high(still red).
After that, it makes a HIGHER LOW (marked with green because we are in an uptrend, right??) and eventually a HIGHER HIGH.

What could we make from this? WE’RE IN A UPTREND!! Market is making higher high and higher low! Correct?
But what happens later? Yep, you got it. Didn’t work. Market was broken down slowly once again. So what have I misunderstood here?

Now take the second chart. It is the same EURUSD trade as the 4HR but in the shape of 1HR chart.
Same thick red trendline as the 4hr once again, and same small red trendline on the price action.

This time, the market makes another (smaller) higher high - higher low; right before the big one that we noticed on the 4HR. Still, didn’t work.
What are we to make from this? Have I misunderstood it? Am I stupid?

Looking forward to ALL comments, but please, keep it clean. I am aware of the fact that I am ignorant of trading, and this is why I seek knowledge from you!
Have a good day.

[subane]

Are you only using higher highs and lower lows to decide weather to enter a trade?

[Carnegie123]

Are you only using higher highs and lower lows to decide weather to enter a trade?

Thanks for your respond.

No, ofcourse not. It is also trendlines.

However subane, this discussion isn’t about WHEN to enter a trade… It is rather about the “flow” of the market which I cannot find a good answer for.

[subane]

I think if we all knew the flow of the market, their would be no more losing trades Trading is a numbers and values game, the more indicators that point in the right direction the higher the probability the market will go that way. I really don’t think their is any specific way to figure out where the market is trending apart from using probability and the algorithems made availabe to us through indicators

[Sweet_Pip]

Thanks for your respond.

No, ofcourse not. It is also trendlines.

However subane, this discussion isn’t about WHEN to enter a trade… It is rather about the “flow” of the market which I cannot find a good answer for.

Hi Carnegie,

Perhaps studying a little about elliott waves would help. According to that theory, when price is trending you’d look for 5 significant swing points…your lower lows and lower highs (referring to your chart). The 5th low say is known to be where the “correction” starts and then you look for 3 significant swing points… higher lows, higher highs and the 3rd higher high in the opposite direction is where the correction will supposedly end and the down trend continues again.

The correction can also be considered an ABC (or ABCD pattern depending on your initial point of reference). Where you marked your chart looks like a classic ABC correction. Using a couple of fibonacci measurements, you can potentially measure where the ABC will end and it’s at that place you’d place a short entry.

Here’s a link to a thread that discusses this in a little more detail. 301 Moved Permanently. It probably would help to get the book too. That method uses 2 timeframes to help identify the flow, or trend. Since then, I made an indicator to tell me which way the flow is on everytime frame using fractal swing points. When a majority or all the timeframes are lined up, then I start looking for these waves, otherwise I consider price to be rangy. The concept on market flow and my indicator I got from here Market Flow

Hope that helps

[Carnegie123]

I think if we all knew the flow of the market, their would be no more losing trades Trading is a numbers and values game, the more indicators that point in the right direction the higher the probability the market will go that way. I really don’t think their is any specific way to figure out where the market is trending apart from using probability and the algorithems made availabe to us through indicators

I respectfully disagree with your point here subane. While indicators being LAGGING, they follow the price action. And by “follow” I mean that they are a few steps behind.

I tend to see it this way: Price action gives birth to the [I]indications[/I] of the [I]indicators.[/I] Not the other way around. See how I mean?
Simplified: Indicators follow the price action.

Indicators only [B]indicate[/B] that something will happen. Price Action is the money flow of the market.

Looking forward to the link. Will comment your post later when I get back home and have more time.

I will write something short right now before I go… And that is that I have encountered Elliot waves before but find them TRULY hard to grasp in real-time data.
Only in hindsight am I (and many, many other traders) able to find the points of Elliot. However, your contribution is VERY much appreciated and I can reassure you that I will go through the link and search for valuable information in order to post in this thread. (I am very determinant to solve this problem!!!)

Thank you!

[subane]

Hi Carnegie,

Perhaps studying a little about elliott waves would help. According to that theory, when price is trending you’d look for 5 significant swing points…your lower lows and lower highs (referring to your chart). The 5th low say is known to be where the “correction” starts and then you look for 3 significant swing points… higher lows, higher highs and the 3rd higher high in the opposite direction is where the correction will supposedly end and the down trend continues again.

The correction can also be considered an ABC (or ABCD pattern depending on your initial point of reference). Where you marked your chart looks like a classic ABC correction. Using a couple of fibonacci measurements, you can potentially measure where the ABC will end and it’s at that place you’d place a short entry.

I’ll add a link momentarily to a thread that discusses this in a little more detail.

mind posting the link here??

[Sweet_Pip]

mind posting the link here??

If you don’t mind, I posted it here…

…click the blue sideways arrow

[subane]

If you don’t mind, I posted it here…

bro, your name and those smileys you use make me quite uncomfortable but thanks for the links! Looks quite complicated but if it will help me from depending on my EA then im all for it

[Sweet_Pip]

bro, your name and those smileys you use make me quite uncomfortable but thanks for the links! Looks quite complicated but if it will help me from depending on my EA then im all for it

Your referring to me as “bro” makes me quite uncomfortable too…and so would “dude”…lol. I really don’t like M’am either (sounds too old ladyish) I prefer “Miss” by store clerks, but they’re too conditioned to using M’am.

Smiley’s are just my way of putting some “tone” into my text, and to keep things light & fun…there’s a fair bit of testosterone “flowing” on these forums which is probably why you don’t see a lot of female members like me and a few others.

Maybe we should petition for “FX-Women” …nah…

[subane]

ohh my bad, I saw FX-men and assumed. Anyway thx again

[o990l6mh]

@Carnegie123

Hi there,

I have a question that ALL of the novices in trading ask themselves.
Is trading really that easy? Everybody is saying look for the lower lows or the higher highs etc…

But is it really THAT easy? I really don’t think so, and I am rather smart person that find new things easy to grasp.
However, on my path to cracking this ‘trading-code’ as I like to call it. I have found what it is that ‘disturbes’ my thoughts of the trend-is-your-friend concept.

I would like to blame it on SIGNIFICANT(LARGE) CORRECTIONS! :mad::mad:

The concept of lower highs and lower lows(and reverse) is skewed in a larger correction and therefore tricks us newbies to believe that the market has reversed direction.
If you do not understand what I mean, I will post a couple of pictures below.

Take a look at the first chart. I assume you all traded the EURUSD downtrend the couple of months. The picture is from that market.
Ok so look at the chart, it is the 4HR chart.

We have a thick red trendline moving down. Then we have a smaller trendline right on the price action.
What happens?
The price action breaks out of the smaller trendline. First it makes a low (marked with red - meaning STILL DOWNTREND), then it makes a high(still red).
After that, it makes a HIGHER LOW (marked with green because we are in an uptrend, right??) and eventually a HIGHER HIGH.

What could we make from this? WE’RE IN A UPTREND!! Market is making higher high and higher low! Correct?
But what happens later? Yep, you got it. Didn’t work. Market was broken down slowly once again. So what have I misunderstood here?

Now take the second chart. It is the same EURUSD trade as the 4HR but in the shape of 1HR chart.
Same thick red trendline as the 4hr once again, and same small red trendline on the price action.

This time, the market makes another (smaller) higher high - higher low; right before the big one that we noticed on the 4HR. Still, didn’t work.
What are we to make from this? Have I misunderstood it? Am I stupid?

Looking forward to ALL comments, but please, keep it clean. I am aware of the fact that I am ignorant of trading, and this is why I seek knowledge from you!
Have a good day.

You haven’t misunderstood anything, quite the opposite.

What you have done is found one of those things that make trading discretionary. It is a judgment call one has to make - does this movement on the charts actually constitute a new swing high or low. If your answer is yes then it must be included in the trend determination process.

The trick is to get a feel for which swings to count and which to ignore. These are the sorts of things that can make trading so frustrating and trial and error is the only remedy that I know of.

So, to answer your question: no, you’re not stupid. Trends can certainly be trickier to trade than they seem in hindsight.

Btw, I can’t help but to notice that the chart you used in this example also displays a rather perfect inverted head and shoulders which is of course also a bullish sign.

Practice practice…

edit: you might want to play with the zig zag indicator in MT4 a bit, perhaps it can help in training your mind in deciding which swings are big enough to count and which are (probably) not.

[DRA]

On the chart you post, what happened was just a break of the inner trendline, normally when this happens the market will return to test that broken trendline then rally to the outer trendline. Notice further down that it also breaks the outer trendline then starts going up.

[Carnegie123]

You haven’t misunderstood anything, quite the opposite.

What you have done is found one of those things that make trading discretionary. It is a judgment call one has to make - does this movement on the charts actually constitute a new swing high or low. If your answer is yes then it must be included in the trend determination process.

The trick is to get a feel for which swings to count and which to ignore. These are the sorts of things that can make trading so frustrating and trial and error is the only remedy that I know of.

So, to answer your question: no, you’re not stupid. Trends can certainly be trickier to trade than they seem in hindsight.

Btw, I can’t help but to notice that the chart you used in this example also displays a rather perfect inverted head and shoulders which is of course also a bullish sign.

Practice practice…

edit: you might want to play with the zig zag indicator in MT4 a bit, perhaps it can help in training your mind in deciding which swings are big enough to count and which are (probably) not.

Thank you very much for your contribution. I have to say, I agree very much with you since you empathize on practicing allot.

I agree on the part of one practicing all the time since trial and error is the only way. But the problem is, or to say, the HARDEST PART, is to know WHAT to practice.
Eventually the pieces will fit in my mind, but as I see it, if you already know what to search for; you most likely will find it allot faster than searching without any light.

But as said before I agree very much and will continue to practice!
Thank you

[Carnegie123]

Hi Carnegie,

Perhaps studying a little about elliott waves would help. According to that theory, when price is trending you’d look for 5 significant swing points…your lower lows and lower highs (referring to your chart). The 5th low say is known to be where the “correction” starts and then you look for 3 significant swing points… higher lows, higher highs and the 3rd higher high in the opposite direction is where the correction will supposedly end and the down trend continues again.

The correction can also be considered an ABC (or ABCD pattern depending on your initial point of reference). Where you marked your chart looks like a classic ABC correction. Using a couple of fibonacci measurements, you can potentially measure where the ABC will end and it’s at that place you’d place a short entry.

Here’s a link to a thread that discusses this in a little more detail. 301 Moved Permanently. It probably would help to get the book too. That method uses 2 timeframes to help identify the flow, or trend. Since then, I made an indicator to tell me which way the flow is on everytime frame using fractal swing points. When a majority or all the timeframes are lined up, then I start looking for these waves, otherwise I consider price to be rangy. The concept on market flow and my indicator I got from here Market Flow

Hope that helps

Thanks sweetpips! Yes I understand that it was only a “small” correction following 1-2-3/zigzag/abc pattern but where do we know it is only a correction? That’s what I meant!

Now I would like to thank you for posting the thread about the ‘never loose’ system. But it has way too many indicators for my taste, however, I hope it works very well for you and one day I will look thru it.

The other page of market flow was very interesting and I wonder if you know of any more sites with this kind of info?

Thank you very much!

[Sweet_Pip]

Thanks sweetpips! Yes I understand that it was only a “small” correction following 1-2-3/zigzag/abc pattern but where do we know it is only a correction? That’s what I meant!

Now I would like to thank you for posting the thread about the ‘never loose’ system. But it has way too many indicators for my taste, however, I hope it works very well for you and one day I will look thru it.

The other page of market flow was very interesting and I wonder if you know of any more sites with this kind of info?

Thank you very much!

Too many indicators??? All it uses is an oscillator and price. The rest is just using fibs to measure the trend wave, and the correction wave. The book and the thread does get into how to determine whether it’s a trend or a correction. Oh well…when you’re ready…

[this_barb]

What you have done is found one of those things that make trading discretionary. It is a judgment call one has to make - does this movement on the charts actually constitute a new swing high or low. If your answer is yes then it must be included in the trend determination process.

Discretion is not a necessity of trading. I simulated price action using nothing but an RNG and people still found ways to analyze it, even though no profit could ever be drawn from it. If anything can lead one astray, it is discretion. Do scientists use their gut to determine the truth?

[SimonTemplar]

While I agree with much of what other posters have contributed, I would add one, simpler point: if it is not clear from the chart whether the prevailing trend is up or down, I would either wait until it is clear (if you only trade that one pair) or move along to look at another pair until you find one that you trade that does have a clear trend. Particularly for newer traders, it is better to stay out of the market and wait for a clear setup than to feel you have to make a trade and pile in without a clear trend to support you. There will always be another setup, after all. Further down the road you might get into range trading etc., but for what it is worth my clear view would be if you are even having to ask what the current trend direction is, the chart is not clean enough to want to be trading it at that point.

[Carnegie123]

@Sweet_Pip

Too many indicators??? All it uses is an oscillator and price. The rest is just using fibs to measure the trend wave, and the correction wave. The book and the thread does get into how to determine whether it’s a trend or a correction. Oh well…when you’re ready…

?

I am more than ready, just looking for what exactly you mean by ‘book’ and the thread has three gartleys in each picture and five fibs. Add another five trendlines and I am looooong gone. :D:D

I do not mean this in negative spirit, it’s just the fact that I cannot find the particular things you are mentioning. If you can help me, that would be very kind.

Thanks!

[Carnegie123]

While I agree with much of what other posters have contributed, I would add one, simpler point: if it is not clear from the chart whether the prevailing trend is up or down, I would either wait until it is clear (if you only trade that one pair) or move along to look at another pair until you find one that you trade that does have a clear trend. Particularly for newer traders, it is better to stay out of the market and wait for a clear setup than to feel you have to make a trade and pile in without a clear trend to support you. There will always be another setup, after all. Further down the road you might get into range trading etc., but for what it is worth my clear view would be if you are even having to ask what the current trend direction is, the chart is not clean enough to want to be trading it at that point.

Ah, great contribution. These kind of posts are very good, because you are bringing something to the table that we can discuss. Great!

This is how I tend to see things (and I am 110% certain, this is the reason why I am losing) when a trend is up. It is 100% up can’t be anything more.
Higher lows and higher highs all over the place.

We have a retracement, and then the market starts to line up to go LONG again. So I enter, and what is it to see? THE MARKET GOES DOWN.

Many say that you should just find the direction of trend… Up, down, sideways whatever.
But the problem is, for us novices (and I’m talking about all of us because I see the same pattern in myself as I see in other noobies) is that when we think the market is trending up, we buy. Only to watch the market get into a significant correction and get wiped out because we’re fighting this significant correction which is, on it’s own timeframe, a TREND IN ITSELF.

Do you understand what I mean?