Max made a request for a brainstorming in the Elite Circle. Shall we concentrate on chop or trend. Which one is more important to identify. Here are my two cents on the topic.
I'm posting here starting a thread because I believe it's important for this section as well.
I believe it has to do with, who you are! If we're thinking in probability terms, or better said let's think about trend! What is trend?
It's more or less the expression of the crowd, right? It's when you get a crowd behavior. A bit like with these indicators on this forum. In the beginning there was the double ma, now it's inside bars.
So, what is all this about? Everybody wants one, right?! Everybody wants to jump on that action, because it will reward their accounts. (It's the same thing with indicators).
Now how does this kind of behavior start? Well, someone has to move the markets right? You can't do it, I can't do it. Why? We don't have enough force to do that!
So, who's doing it? The big players!
When and why do they do it?
They do it whenever they wish to make money, or they do it when something fundamental has shown up. The last meaning that the price action achieves balance based on the fundamentals inputs.
If we are to be using indicators, they're always gone lag, because the price action is represented after it has taken place.
The same is valid during chop. You'll always be able to see chop first after it has developed. And the same is valid with trend, you're always going to see that trend has finished after it has ended.
Remember this is also valid with price action (besides indicators).
So back to the initial question, what's the best way? Undoubtedly trend. Why? Because that's where the most probable behavior of the crowd is taken place. What do I mean by that?
(By the way, I believe traders, should start looking what's behind, the price action, besides numbers and charts, and why it develops the way it does.)
Remember the two movements, (look above) that means that whenever we get those movements we got momentum. That means that people are active (why they're active deserves a thread of it's own, but we'll get into that another time).
That in itself creates a so called snow ball effect. Remember the crowd is normally dormant. Meaning that it takes a while to discover the snow ball. When it has discovered it, it jumps on.
Depending on the action, if it's artificial or not (the amount and the frequency of fundamental information is pretty low normally, that's why most of the price action movements are artificially created by the big guys in order to move the markets) we get a momentum.
If an artificial move then a small momentum, if a big then a bigger momentum. In either case we get a momentum.
Remember, we need the crowd in order to get the movement. The big guys are just starting it and ending it.
Therefor, what we need to concentrate on is to get a piece of this momentum. Just think of it, it's pretty impossible to know when this momentum will start or end. But we do know that it starts and that it ends. And we know that in order to get them we need a crowd.
Isn't it pretty ironic according to this, to see how much people sacrifice both money and time in order to find ZERO LAG indicators.
The money is where the crowd is. If you're not an investor, become a scalper and look for a toll that helps you to confirm that we got a momentum taking place. By scalper I mean that, as soon as you get your money, get the hell out of there and be happy.
My answer to the question is that we should concentrate on momentum (trend)!
The following 2 users say Thank You to George for this post:
I agree with what George said about trend. I believe in order to make money, we need to follow the direction of the trend. Even sometimes we may trade in a countertrend fashion, we still expect a trend, maybe on a lower timeframe, in the opposite direction of the current price action.
Whether it is more profitable trading trend or chop depends on individual personality, the market and the timeframe the trader is focusing on. I feel the equity index market is probably more suitable for counter-trend trading and I have heard people making fortune trading that way.
IMHO, the difficulty is really how to define a trend, and how to detect a trend in the early stage...just my 2 cents...
Thank you for your post. In my opinion, it is imposible to make order in that chaos (the market), and even by picking up patterns one can never do so either. Even if you call yourself Robert Pretcher you can't be knowing that with 100% accuracy -how to detect a trend in the early stage-. Not even the guys (the big players) that start them know if they're going to unfold or not.
And still we're looking for indicators that don't lag and price action patterns we can predict. IRONIC
I believe that there are only two things that work. One is probability which implies having a big, big account. And the other is discretionary trading.
But remember, it's not the car that's the most important, it's always the driver!
chop is in circle, trend is following the arrow. But that is just in a hindsight, in real time you just follow the market bar by bar and as long as it makes HH then it trends up, LL then it trends down, HH, LL then it chops
The following user says Thank You to cory for this post:
Please,do so! You don't have to ask me for permission. My task is to moderate, not to create order being preventive! Yours is to express yourself in case you wish so, and to respect the atmosphere and the rules of this forum.
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95% of traders lose.
Do you think most of them were using "conventional wisdom"?
What about all of the fund managers who can not beat the index?
What about all of the fund managers who have lost billions?
THERE IS NO TREND.
TREND IS A CONCEPT.
TREND EXIST ONLY IN THE MIND OF THE TRADER.
Look at the chart and tell me if the trend is up or down.
TREND IS RELATIVE TO THE OBSERVER JUST LIKE TIME WHICH IS ANOTHER CONCEPT.
One must separate what is REAL from what is CONCEPTUAL.
Do you see the multimeter in the upper right hand corner? That shows the trend on 9 different chart periods over 5 different bar periods. You are looking at 45 different trends for the same instrument at the exact same time.
THERE IS NO TREND.
The following 3 users say Thank You to TheRumpledOne for this post:
I agree that 95% of traders lose because of their perceptions of the markets and all the criteria involving that action. But I would like to know if there's no trend, why there's no trend, and if there's no trend then what is it?
And if "TREND IS RELATIVE TO THE OBSERVER JUST LIKE TIME WHICH IS ANOTHER CONCEPT." are you telling me that the only thing you need is to direct your subjective perception to include winning and that's what you'll get?