Trend or Contra-trend? That is the question.

Reminds me of "To be or not to be?"

For the most part, I am a contra-trend trader, but I would like to become more balanced if it can make me more successful. I'm interested in hearing what successful trend traders use, indicators or otherwise, for their entries and exits for ES.

My simple observation is the ES doesn't trend a great deal of the time, but maybe I just don't have the confidence to make the trend my friend.

I remember discussing this with pt_emini and I think we came up with the figures that the ES trends (on an intra-day basis) 20% of the time and trades sideways 80% of the time. There was nothing scientific that we used to come up with those numbers. It was just a count of days based on a visual IQ of the shape of the chart for the day. If we were to scientifically define what a trend day is then we could easily count the number of trend and non-trend days.

In fact, I did come up with a psuedo-formula for doing that. It simply took the open and close of the day and measured their proximities to the two extremes and said that if we opened very close to one extreme and closed very close to other extreme then it was a trend day. Using this logic and daily OHLC data one should be able to perform this calculation in Excel.

This is a question (dilemma) where the market profile can help in understanding basic market structure.

In market profile terms, trend day's are the rare exception. The market may run (trend) for an hour or two, but almost always builds a value area sometime during the trading session.

With this understanding, we can tailor our expectations to reality... when the market is either in an established value area or is developing a new value area, trend trading is not appropriate.

In simple terms, what I look for in going with the trend (& ignoring counter-trend signals) is what I call clear air... in MP terms this is depicted as single prints as price breaks free from an established value area. As long as price is running & printing singles it rarely ever pays to fight the trend. This is the situation where momentum indicators (oscillators like stochastics, rsi......) quickly get into trouble because the strong directional price momentum pins the indicator at an extreme level and then gives a series of false signals.

Fading momentum is really only appropriate (statistically valid) inside value or developing value.

pt_emini, what do you mean by single prints?

I don't use MP. Is there another way to see this information in time or volume bars?

Thank you.

Here is a blurb about: Single Prints. I documented testing Single Prints for 3 months: May 2005, June 2005, and July 2005.

Thanks. Is there a way to convert or read this information on customary bars or is the exclusive to MP. I use a 3 and 15 minute bar.

Please, anyone else please chime into this discussion. Surely, some of you out there have worthwhile ideas about the subject based on your trading experiences.

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Originally posted by topgun

Thanks. Is there a way to convert or read this information on customary bars or is the exclusive to MP. I use a 3 and 15 minute bar.

Please, anyone else please chime into this discussion. Surely, some of you out there have worthwhile ideas about the subject based on your trading experiences.

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on a bar chart they would be gaps left on a chart, go to cbot .com and read up on market profile,it's a good tool once u figure it out

topgun: Single Prints are easiest to see on a 30 minute bar chart as that is the time frame that Market Profile uses. Look for a bar which has at least 1 price which doesn't overlap any of the preceding bars and which no subsequent bars have overlapped. The first price out of the area that was being overlapped (previously) is the single print price. While that bar is completing it's called an "unconfirmed single print." If the subsequent bar opens such that at least one of the prices on the previous bar remains as a non-overlapped price then it's a confirmed single print. Once a bar crosses the price subsequently it's a filled single print.

Here's an example of a Single Print that still remains from 5/20/2008. The DVATool automatically calculates and draws these on bar charts for you.

Does anyone have an opinion on which are the more appropriate numbers to consider - value areas from the regular session - or the 24 hour session? The numbers on this site are the regular session, correct?

Regular session is best in my opinion...then watch the 60 minute range....seems many are catching on to using the current days DEVELOPING value areas too as they unfold...

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Originally posted by topgun

pt, in the chart you posted, when the mkt broke the prior LOD/overnight low, was that a sell for you?

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To really understand that specific trade, you must look at the daily bar chart. Call up a 1 month daily bar chart and draw an uptrend line connecting the daily lows of the prior week's bars. Notice how taking out Friday's VAL violated that 4 day uptrend line. In my work, the break of a steep 4 day trendline is a powerful signal. The break of Friday's low and the overnight (globex) low was additional confirmation of the new price direction (down), and as we now see added signficant jet fuel to the fire. In this actual trade, I was holding contracts short (over the weekend) established above the 1240 level on Friday. Also, Monday morning I added more size to the open short position within the first two retracements after the break below that last support level (Friday's low). In my view anyone fading that breakout and prematurely trying to pick a bottom would quickly get burned, which they did obviously.