nunrgguy
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Strange as it may sound, old fashioned things such a Donchian channels when used in a none standard way can be used to determine whether the market is tranding or ranging.
This is just an example and in no way am I saying trade like this AT ALL - it's not going to get you in at tops and bottoms, doesn't look at past supply demand area etc, rather it looks for current supply and demand to be established and then tries to get you on a trend if it develops and out before it ends but near to its end. It's a purely reactive, not predictive methodology.
I'm not setting a chart up to show this but imagine attempting to trade the 'weekly trend' on cable.
Putting this into context I'm talking about attempting to hold trades for, say 3 to 5 weeks. Any more than that on cable and you'd be shafted as it's been ranging since 2008.
OK weekly trend hold period but you'd be looking at the H1 charts for entries and management. How you enter is up to you...
In stocks the 200 MA is pretty standard (that comes from...approx 253 trading days in a year in te stock market but ..you've got weekends in between etc lol).
In forex (MT4 anyway) you'd be looking at 168 periods to define the weekly (10080/60 = 168) from an hourly chart. Around this you put a 168 Donchian channel.
You'd also set up a Donchian channel for the daily (1440/60 = 24 period, surprise surprise)
Standard to trend trading you can only go long above the 168 MA and short below it. OK but what about those times when price ranges....trends are only apparent in hindsight.
So 'Rule 1', you can only consider starting a new trade sequence when the previous one is over.
So, price has been trending down - this is signified by price being below the 168 MA and continually breaking the 168 Donchian downwards. When would a trade sequence end? If using trend following and nothing else, a trade would end when price moves upwards far enough to break through an upper DAILY (24) Donchian channel. However, that would only signify then end of a trade. The direction to enter next would still be down unless the following criteria were met:
1. Price rises far enough to go higher than the 168MA. Now this is where/how you can avoid SOME (not all whipsaws): Just because price is now above the MA does not mean a long is on. Why? 1, unless there is enough upwards momentum to break out of the WEEKLY 168 Donchian channel to the upside, the downtrend may still be in place or the market has started ranging. Also, price wavering around the 168MA will be signified by the DAILY channels being either side of the 168: not a good time to enter.
No trend has been established until the daily high and low are above the 168 and the weekly channel has been broken upwards, then you can look for starting a position, whether than be on breakouts or pullbacks.
2. You have to add to winning positions to make this work. One off punting will get you murdered when you do get stuck in ranges...you are trying to lose little of your own capital but are greedier with the markets money. Yes, you can sometimes ending giving a lot of it back but, protecting your own money is paramount.
3. Cutting trades early will get you murdered, don't second guess, let the market take you out.
4. The numbers I've presented are only relevent to viewing things from a 1HR chart and I chose them carefully, different charts would require different numbers, and as I already mentioned, in certain markets this strategy plain will not 'work' on higher timeframes.
5. Those who say when the market is trending trade accordingly and when it's in a range trade accordingly I can almost guarantee are part of the 95%. Why? You don't know what the market is doing until you are in it.
6. All probably an extremely LONG way of simply saying: Define EXACTLY what a trend is to you and trade it accordingly if trend trading is your thing.
This is just an example and in no way am I saying trade like this AT ALL - it's not going to get you in at tops and bottoms, doesn't look at past supply demand area etc, rather it looks for current supply and demand to be established and then tries to get you on a trend if it develops and out before it ends but near to its end. It's a purely reactive, not predictive methodology.
I'm not setting a chart up to show this but imagine attempting to trade the 'weekly trend' on cable.
Putting this into context I'm talking about attempting to hold trades for, say 3 to 5 weeks. Any more than that on cable and you'd be shafted as it's been ranging since 2008.
OK weekly trend hold period but you'd be looking at the H1 charts for entries and management. How you enter is up to you...
In stocks the 200 MA is pretty standard (that comes from...approx 253 trading days in a year in te stock market but ..you've got weekends in between etc lol).
In forex (MT4 anyway) you'd be looking at 168 periods to define the weekly (10080/60 = 168) from an hourly chart. Around this you put a 168 Donchian channel.
You'd also set up a Donchian channel for the daily (1440/60 = 24 period, surprise surprise)
Standard to trend trading you can only go long above the 168 MA and short below it. OK but what about those times when price ranges....trends are only apparent in hindsight.
So 'Rule 1', you can only consider starting a new trade sequence when the previous one is over.
So, price has been trending down - this is signified by price being below the 168 MA and continually breaking the 168 Donchian downwards. When would a trade sequence end? If using trend following and nothing else, a trade would end when price moves upwards far enough to break through an upper DAILY (24) Donchian channel. However, that would only signify then end of a trade. The direction to enter next would still be down unless the following criteria were met:
1. Price rises far enough to go higher than the 168MA. Now this is where/how you can avoid SOME (not all whipsaws): Just because price is now above the MA does not mean a long is on. Why? 1, unless there is enough upwards momentum to break out of the WEEKLY 168 Donchian channel to the upside, the downtrend may still be in place or the market has started ranging. Also, price wavering around the 168MA will be signified by the DAILY channels being either side of the 168: not a good time to enter.
No trend has been established until the daily high and low are above the 168 and the weekly channel has been broken upwards, then you can look for starting a position, whether than be on breakouts or pullbacks.
2. You have to add to winning positions to make this work. One off punting will get you murdered when you do get stuck in ranges...you are trying to lose little of your own capital but are greedier with the markets money. Yes, you can sometimes ending giving a lot of it back but, protecting your own money is paramount.
3. Cutting trades early will get you murdered, don't second guess, let the market take you out.
4. The numbers I've presented are only relevent to viewing things from a 1HR chart and I chose them carefully, different charts would require different numbers, and as I already mentioned, in certain markets this strategy plain will not 'work' on higher timeframes.
5. Those who say when the market is trending trade accordingly and when it's in a range trade accordingly I can almost guarantee are part of the 95%. Why? You don't know what the market is doing until you are in it.
6. All probably an extremely LONG way of simply saying: Define EXACTLY what a trend is to you and trade it accordingly if trend trading is your thing.
It's my first sensible post in a loong time. Normally I just post bu0llocks these days 
