What makes a Trend?

I have heard many different opinions about this topic.

It would be interesting to hear what different peolpe feel constitutes a Trend.

I guess technically you could say that a trend could be as little as few candles in the same direction to as large as higher highs and higher lows for a six month period or longer.

Since time will alter the outcome of your answers please include which time frame chart you use. Also at which point is the Trend established enough for you to take a trade in its direction.

Looking forward to your answers.

On a 1 minute chart apply one 200 SMA (High) and one 200 SMA(Low) If the market trades above the 200 High SMA the trend is up and if it trades below the 200 Low SMA the trend is down. When the market trades within the two SMAs its none trending and best to stay away. Some aggressive traders may use 89 instead of 200. Now wait for 2 red candles to appear followed by 2 green candles and then go long and viceversa for going short.

I spent some time trying to define a trend for back testing purposes but with hindsight and not in an attempt to predict if we're in a trend or not. My objective, was to try and mathematically define if a day had been a trend day or not given some values over the day. i.e. the day had generally trended either up or down on any time frame.

What I came up with was a formula that stated that the opening price should have been within 5% of the day's high or low and the closing price should have been within 5% of the day's low or high and that the range of the day should be no less than 80% of the previous 10 trading days' average ranges.

Using a formula like this allows a computerized system to pick out trend days just using the OHLC prices from daily data. I was surprised at how well it worked and seeing that you can generate OHLC values over any time frame it should be time frame agnostic. However, I'm not sure if this is what you're looking for.

The question I believe that myptofvu wanted answered is how to decide whether the market was trending or not and in what direction so as to place a trending trade. One word of caution I forgot to add in my previous post was that don't trade the candlestick pattern if occures immediately after a new high or low for the day the trend could well be reversing at that stage.

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Originally posted by ak1

The question I believe that myptofvu wanted answered is how to decide whether the market was trending or not and in what direction so as to place a trending trade. One word of caution I forgot to add in my previous post was that don't trade the candlestick pattern if occures immediately after a new high or low for the day the trend could well be reversing at that stage.

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Thanks for your response ak1,

What I was after was in part what you stated above, but primarily I was looking to see what the different definitions of what each trader considers to be a Trend.

I know that some people use indicators others a number of points moved and even others who look for a S/R point to be breached etc.

I expected that the responses would be very varied (that each person had his own interpretartion of what constitutes a Trend)and then by looking at the responses see if there was any consensus for one way over the others. There has been 143 views of this topic but only 2 responses soooo I guess its not going to happen.

With all of us hoping to capitalize big time when this market turns around I thought that discussing Trends was a worthwhile subject and seeing if we could all discover a new or better way to profit from them.

I would like to ask you some questions about your SMA method but waiting till I get my keyboard back from repairs (don't buy Sony)and get off this old/slow laptop I'm on.

Sure myptofvu you can ask me all you want about the SMA approach. I am a trader who is willing to share with others his strategy so that others can make money too.I am sometimes pained by the fact that many traders visit this site but refrain from giving out their approach/ strategy.

up trend: higher price low followed by a higher high

down trend: lower price high followed by a lower low

sideways / consolidation:
higher high followed by a lower low
higher low followed by a lower high
and so on...

Using two time frames simultaneously. The trade direction time frame, is the next higher time frame (slower), and is viewed as comparing the current bar to the prior bar. The trading signal time frame (faster) is viewed as a sequence of swings (up and down).

For example:
Swing trading:
Weekly bars for direction and swings/breakouts on the Daily chart

Intra-day trading:
15 minute bars for direction and 1 minute chart swings, breakouts and impulses

I like the a-b-c correction on a faster time frame which still keeps the larger time frame intact. Fakes out some traders only to have the power of the larger time frame exert it's ongoing power. Some like to throw a fib on it too!

I agree AK1 but there is a great benefit in trying to formulate ones ideas into words (Posts). It all comes back around. Please don't let it stop you in the future.

Good trading

Bruce

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Originally posted by ak1

Sure myptofvu you can ask me all you want about the SMA approach. I am a trader who is willing to share with others his strategy so that others can make money too.I am sometimes pained by the fact that many traders visit this site but refrain from giving out their approach/ strategy.

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Could you please explain how to use the faster and slower time frame with a chart example