In at the birth

[timsk]

I like trading reversals but I still pay attention to the trend. I would MUCH rather trade a reversal with the trend than against it because I am stacking the probabilities in my favour.

Eg. daily pinbar on 21st April on UsdCad with the trend - I am happy to take that without hesitation.

Hi Rags,
Thanks for the chart.
Your trade looks great - so no criticism from me on any level. However, the annotation I've added is the ideal - or so it seems to me. You waited until the trend was well established before taking your short. It was wearing long trousers to use Jon's analogy. However, if you had a mechanism that enabled you to enter at the peak with the same degree of confidence that you had when you entered where you did - wouldn't that be great? There WILL have been traders who shorted near the top and, by the time price got to the point you entered the market, they were adding to their position for a 2nd time and already had a good profit locked in. Do I have the answers as to how to achieve this ideal? No, sadly not. My thesis is simply that if we can identify reversals quickly, then at least there's the potential to enter at the birth of the trend.
Tim.

 

[blancspa]

Start of the trend (break out)
I was just reading an article in one magazine and the person there warns of trusting the trend at all cost, however he uses the following technique to make trend trading as friendly as possible:
1. Look back over the past 75 to 100 candles, if the price trend sideways draw a boundary around those 100 candles.
2. His believe is that if the price can break the barrier created over 100 candles, then the trading crowd decided to rise up and revolt against the range. He then waits for the candle to close above the range.

I guess this does not apply to anythig below 1h TF, unless skilled with trading market noise , sors I watched the market until 3AM last night

 

[rags2riches]

There WILL have been traders who shorted near the top and, by the time price got to the point you entered the market, they were adding to their position for a 2nd time and already had a good profit locked in. Do I have the answers as to how to achieve this ideal? No, sadly not. My thesis is simply that if we can identify reversals quickly, then at least there's the potential to enter at the birth of the trend.
Tim.

Timsk your annotations show the correct way to pyramid the shorts and this is what I aspire to. Anyone who did this is probably on a beach somewhere.....

Shorting at the top would have been more speculative but the risk/reward makes up for it I suppose.

 

[timsk]

Start of the trend (break out)

No blancspa - trends don't start with breakouts! What you describe is a breakout of a trading range which often occur before the start of a new trend and are typically sandwiched between trends. There's nothing wrong in what you describe, but trading breakouts (from trading ranges) won't get you in at the birth of the trend. Breakouts are breakouts and reversals are reversals. The latter are always found at the start and end of trends, the former never are. (To be clear, I am talking about breakouts from trading ranges only, as opposed to say, breakouts from inside bars - which I think of as reversals!)
Tim.

 

[Chorlton]

....and out at the death

Fully fledged trends are easy to spot in hindsight, as are completed ones. In at the birth and out at the death is the ideal, but probably only something Mystic Meg can aspire towards. For most of us the birth requires some confirmation, maybe whilst the little blighter is still in shorts pants at primary school, or in longs at secondary school, or on graduation from college, or when? 'Course if you require so much confirmation that you are only convinced as he draws his pension then the fatal heart attack is not long coming.

So, is anyone up for exploring the anatomy of a trend? Let's start with the birth, or near to, if you are.

good trading

jon

... It starts with a breakout......

 

[blancspa]

No blancspa - trends don't start with breakouts! What you describe is a breakout of a trading range which often occur before the start of a new trend and are typically sandwiched between trends. There's nothing wrong in what you describe, but trading breakouts won't get you in at the birth of the trend. Breakouts are breakouts and reversals are reversals. The latter are always found at the start and end of trends, the former never are.
Tim.

well, in that case I will have to bin the October 2008 copy of Technical Analysis of Stocks & Commodities (it was free trial copy anyway). no worries

 

[barjon]

Er, not sure I agree with that tim - depends how you define it I suppose.

Take something that's been in a trading range for a very long time. You'd be pretty bold to suggest any breakout represented a reversal or continuation of a much, much earlier trend (if indeed there was one).

jon

 

[Chorlton]

No blancspa - trends don't start with breakouts! What you describe is a breakout of a trading range which often occur before the start of a new trend and are typically sandwiched between trends. There's nothing wrong in what you describe, but trading breakouts (from trading ranges) won't get you in at the birth of the trend. Breakouts are breakouts and reversals are reversals. The latter are always found at the start and end of trends, the former never are. (To be clear, I am talking about breakouts from trading ranges only, as opposed to say, breakouts from inside bars - which I think of as reversals!)
Tim.

Tim,

I thought I would reply to your comments above, as I also suggested that a trend starts with a Breakout.

What you describe is a breakout of a trading range which often occur before the start of a new trend and are typically sandwiched between trends.

Surely this is dependant on what timeframe you are looking at? The above could refer to one longer term overall trend (with the trading range sandwiched between) or TWO shorter term trends. If its the latter, then the breakout from the range would signify the beginning of it.

Or am I missing something?

 

[TheBramble]

Take something that's been in a trading range for a very long time. You'd be pretty bold to suggest any breakout represented a reversal or continuation of a much, much earlier trend

Would it matter though? Do you need to know the prior (if any) trend to work a breakout? Some would say that a breakout from a range is more likely to a continuation than a reversal. I’ve given up counting those that do and those that don’t. Besides, not a lot to do with the birth (or death) of a trend.

 

[timsk]

I don't know if our long departed friend dbphoenix ever surfs these boards but, if happened to look in on this one, he'd be laughing his cotton socks off! The reason being that all these terms are down to definition and, if there's one thing he was fond of pointing out, it was that each trader MUST be crystal clear about what they mean when they use terms like 'breakout' or 'reversal'. One trader's breakout is another trader's reversal! For a breakout to occur, price has to break out of something. If it's a trading range (i.e. more than 1 candle - regardless of timeframe) and price breaks out of the top of it, there will have been an earlier reversal at or near the bottom of the range where, if a trend line was drawn in, would mark the birth of the trend. So, by my personal definition, breakouts don't ever start trends. Never, period. Breakouts from continuation patterns part way through a trend can and do occur - no issue there. Some traders reading this may ask what about price breaking out above/below the high/low of the previous candle? To me that would, potentially, be a reversal pattern; it doesn't constitute a breakout in my book. No way Jose. If it did, most candles could then be describes as 'breakout' candles and then the meaning and value of the term would largely be lost.
Tim.

 

[Mr. Charts]

I don't care about definitions and semantics and theories, I just like the practicalities of taking large bites out of trends - it's worked for me for years and been my friend till the bend at the end, where upon a new trend might be born.
Richard

 

[barjon]

Hey guys,

Let's not get hung up on the semantics. What I was hoping to do was explore the anatomy of a trend from birth to death including various confirmations and staging posts along the way. Where and how anyone chooses to trade it is up to them.

good trading

jon

 

[timsk]

...What I was hoping to do was explore the anatomy of a trend from birth to death including various confirmations and staging posts along the way.

Birth (of an uptrend)
Kinda tricky to spot because the institutions are accumulating in a way that doesn't draw attention - hence the fact that trading ranges often precede trends.
Middle
HH's and HL's as per RagsToRiches' chart.
Death
H&S pattern (i.e. Dow theory) or a double top.
Rinse and repeat. . .

 

[Mr. Charts]

Hey guys,

Let's not get hung up on the semantics. What I was hoping to do was explore the anatomy of a trend from birth to death including various confirmations and staging posts along the way. Where and how anyone chooses to trade it is up to them.

good trading

jon

TBH, Jon, I think that is akin to the H.G. and is a forlorn hope.
Obviously TFs come into it, volume with some instruments, not to mention news in all its varieties - economic and funnymentals.
Identifying turnarounds on US stocks is sometimes possible and they are often the start of new trends intra-day. The knowledge and skill to read changing buy/sell pressures can spot reversals and breakouts with a good degree of probability, but not with certainty. I really don't believe that all instruments trade in the same way so that also affects the way trends appear to start and die.
Chart indications themselves can be self-fulfilling to a minor extent, but all in all trend births and deaths are not like life, there are few rites of passage and even fewer certainties.
But then, apart from a purely academic POV, what is the purpose without such unlikely predictabilities actually being tradable?
Richard

 

[TheBramble]

[So, is anyone up for exploring the anatomy of a trend? Let's start with the birth, or near to, if you are.

OK. Let’s throw this to the wolves…

Regardless of TF...

3 consecutive up bars or 3 consecutive down bars.

For our younger viewers, an up bar is where the close is higher than the open – (forget the H and L).

You can work it out for the down bars.

I’m not saying this sequence ‘means’ the start of a trend as they occur in the middle of their dark counterparts and with no particular frequency just about everywhere else. I am suggesting though, that the start of any trend does begin with this formation.

 

[trader_dante]

Hi Rags,
Thanks for the chart.
Your trade looks great - so no criticism from me on any level. However, the annotation I've added is the ideal - or so it seems to me. You waited until the trend was well established before taking your short. It was wearing long trousers to use Jon's analogy. However, if you had a mechanism that enabled you to enter at the peak with the same degree of confidence that you had when you entered where you did - wouldn't that be great? There WILL have been traders who shorted near the top and, by the time price got to the point you entered the market, they were adding to their position for a 2nd time and already had a good profit locked in. Do I have the answers as to how to achieve this ideal? No, sadly not. My thesis is simply that if we can identify reversals quickly, then at least there's the potential to enter at the birth of the trend.
Tim.

What I don't understand about all this talk of LHs and LLs is that a LH is not in place until the LL is taken out, right? And if so, you sell the low and are open to the mother of all squeezes plus your stop needs to be above the LH to be safe (which is a huge stop).

It's easy to say LH, LL in hindsight but as Bramble said, not so easy when the space to the right is blank...

 

[tafita]

What I don't understand about all this talk of LHs and LLs is that a LH is not in place until the LL is taken out, right? And if so, you sell the low and are open to the mother of all squeezes plus your stop needs to be above the LH to be safe (which is a huge stop).

It's easy to say LH, LL in hindsight but as Bramble said, not so easy when the space to the right is blank...

This can sometimes be the case, but where you employ a trend trading system with sufficient capital and good risk management over a good range of liquid markets it can work for some. Also, a trader can be more aggressive and sell the first low after the second LH, if you catch my drift.

 

[Mr. Charts]

"I am suggesting though, that the start of any trend does begin with this formation. "

So are you suggesting that a trend begins with an explosive move and not a spluttering momentum- gaining move?
Of course, the greater the time frame the more apparent the continuity and the more likely it is that that formation appears. However, within a smaller time frame I would disagree as I have seen many trend "births" where there have been two bars in one direction, then a retracement - albeit of a minor nature - followed by the same repeat formation before a move which could be explosive, although not always. Many trends are grinders, systematically grinding the bears into the dust and facilitating cheaper buying and vice versa for down trends.
You could define the start of a trend as being three consecutive highs or lows, which would be fair enough, but that doesn't necessarily mean the "trend" won't fail shortly afterwards and thus negate the definition.
Or are you merely stirring with a spanner?
Richard

 

[blancspa]

....I just d like to say the last post was awsome...

thank you

"Imagine yourself as say a welter-weight, in the ring with a heavy-weight. You are superbly fit, well trained, motivated and fast. Your opponent is big, slow, and out of shape. However, one punch and you are history, no matter how fit or fast you are. The heavy-weight flow of capital must be respected, and understood."

 

[TheBramble]

just try , don`t be afraid

Probably wont be an issue for you blancspa, but another piece of crap like that and you're on my ignore list.

Stay small. Stay quiet. And learn. And KTFQ.