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Definition of a trending day
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Definition of a trending day

  #51 (permalink)
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philippe07024 View Post
In the book "Enhancing Trader Performace", Brett Steenbarger mentions 3 types of days to analyze trading performance:



Does anyone know if he defined these types more specifically (for example with formulas)?

I do not know the definitions, but you can create some for yourself ...


Trending Day

Days open near the low and closes near the high. What you need to define is "near", for example you could choose a number such as 15%. In that case the upper and lower tail should each not be larger than 15% of the range of the candle. I would exclude narrow range days from the definition of trending days.


Reversal Day

The reversal itself is a long tail either on the upside or the downside of the candle. For a reversal up, I would also want to see the candle close in the upper half of its range, for a reversal down it should close in the lower half of the range. In all cases there should be a significant upper or lower shadow. Here you would need to define what is significant, you could for example ask for 40%. I would also want that the upper and lower shadow is significant in terms of the average daily range of the preceding N days, and thus exclude narrow range days with a moderate shadow from the definition.


Balancing Day

The balancing day closes near the midpoint of its range. It is either a narrow range day or a day with a double reversal to the upside and the downside.


There are a lot of different types of days that do not fit into the three categories, I would rather follow the ideas put forward by Jim Dalton to describe the different types of days in terms of their price volume distribution.

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  #52 (permalink)
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Fat Tails View Post
...There are a lot of different types of days that do not fit into the three categories, I would rather follow the ideas put forward by Jim Dalton to describe the different types of days in terms of their price volume distribution.

CBOT Market Profile, 1985, listed two day types. CBOT Market Profile, 1991 has four. Steidlmayer on Markets, 1989, posts six. MOM, 1990, has nine. Steidlmayer on Markets, 2003, gives five. Markets in Profile, 2007, does not have an index item for Day Type!

The primary writers in the area do not agree with each other or even themselves on the number of basic day types that exist. But day type presumably shows the areas of dominance of the trader types (short and long timeframe) and so is the starting point for profile analysis. How can the student be expected to learn holistic profile market analysis if the guidelines are so variable and so poorly defined?

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trendisyourfriend View Post
CBOT Market Profile, 1985, listed two day types. CBOT Market Profile, 1991 has four. Steidlmayer on Markets, 1989, posts six. MOM, 1990, has nine. Steidlmayer on Markets, 2003, gives five. Markets in Profile, 2007, does not have an index item for Day Type!

The primary writers in the area do not agree with each other or even themselves on the number of basic day types that exist. But day type presumably shows the areas of dominance of the trader types (short and long timeframe) and so is the starting point for profile analysis. How can the student be expected to learn holistic profile market analysis if the guidelines are so variable and so poorly defined?


Actually it is difficult to describe days now. The off-session volatility has increased, and I personally consider the European and US sessions as separate trading days, which are driven by different sentiments and news.

On the chart below I have commented the European session below and the US session above price action.


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Fat Tails View Post
Actually it is difficult to describe days now. The off-session volatility has increased, and I personally consider the European and US sessions as separate trading days, which are driven by different sentiments and news.

On the chart below I have commented the European session below and the US session above price action.

I think that a generalization as you have done is really all that one needs to do as it pertains to the past.

The primary benefit of understanding the type of day is to do so early enough in the day to be able to take advantage of common characteristics of such a type as the day unfolds. Knowing that a day was a "normal" or "trend" and so on does no good if it is only identified at the close.

It is useful to understand how the recent trading activity, whether it be the prior RTH activity, or the asian/european markets, relates to the type of day we are likely to have. Finally, in line with the aforementioned objective of determining the likely type of day early in the day, in conjunction with recent prior activity, observing the market at the open can give us clues and ideas as to what to expect.

As far as creating some objective way to define a trend, it's really only academia to do so. If one really wanted to compile a list of day types for the past few years for a single instrument (doesn't sound too exciting), it shouldn't take more than a visual inspection and could be completed in a matter of a couple of hours most likely. Either way, real-time observation of a market is a far more practical way to actually apply this stuff, and all the stats in the world will not give an edge greater than what the pragmatic trader who knows his market has. The good traders I have observed on this site and elsewhere have the instinct based in reality, and the ability to act on that instinct; they may not know the percentage of trend days exactly, but they darn sure know how to trade them, I'd bet.

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  #55 (permalink)
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@Big Mike, I think the problem is trying to put a linear type model on a non-linear data series. So we'll never get around that.

BUT....

If I had to do it, I would not even consider volatility. I would consider swing high's and swing lows on the intraday timeframe of your choosing. Ultimately, a simple version of this formula would simply calculate retracements from any new high reached for the day in an uptrend and retracements from any new low in a downtrend.

In the case of an uptrend, you might measure the high from the open (whatever time you want that to be) and then base all retracements from that "leg". Of course this wouldn't work in real time as this measurement wouldn't be meaningful until you had a good bit of the day's price action in place, but I understand you're ok with that.

So you start with a "did we close higher or lower than the open" filter. Then you run a retracement filter to see "did we retrace more than x% as we reached higher and higher highs (in relation to the open). If it violates your chosen allowable retracement for a good "trend" then it will be an "uptrend" day. If it closed higher than the open, but retraced more than your allowable %, then it's a range day. Same calculation applies to down days.

This could be a good or bad idea, but I just thought I would give some input. That's how we'll all improve.

-IT7

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The tool TraderVue uses its own definitions:
Inside Range day – all trading was within yesterday’s price range
Trend Up day – closes above yesterday’s high, opens in bottom 15% of day’s range, and closes in top 15% of day’s range
Trend Down day – opposite of trend up day
Outside Range day – trades at least partially outside yesterday’s range, but was not a trend day

trend day | Tradervue Blog

Recent webcast about this tool available on futures.io (formerly BMT):
Webinar: How To Make Your Journal Work For You

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Big Mike View Post
I want to clarify...

I want to identify a trend day using hindsight, not in real time. This is for statistics gathering.

What is the simplest definition of a trend day, so it can be programmed into Excel?

It seems we cannot really agree so far on what a trend day is (without ambiguity).

Mike

There`s no way to identify it using hindsight.The only way is an attempt to stay on the correct side of the market.It can be done in the now only - the only place available.

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tst1 View Post
There`s no way to identify it using hindsight.The only way is an attempt to stay on the correct side of the market.It can be done in the now only - the only place available.

Mike was saying that he was just looking for a specific set of conditions which would define a trend day, so that he could then collect the statistics for those particular conditions. For this particular thread, his aim was not to trade this information in real time with live data.

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anny View Post
Mike was saying that he was just looking for a specific set of conditions which would define a trend day, so that he could then collect the statistics for those particular conditions. For this particular thread, his aim was not to trade this information in real time with live data.

LoL...And i`m telling you that there are no such conditions to define if it would be a trending or ranging day in advance.What you can do only is to monitor and analize it here and now,in the present.Your task is to stay on the correct side of the market at all time.Some days ago it was called a ''tape reading''.But guess about the direction and you`ll be freaked,guaranteed.

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tst1 View Post
LoL...And i`m telling you that there are no such conditions to define if it would be a trending or ranging day in advance.What you can do only is to monitor and analize it here and now,in the present.Your task is to stay on the correct side of the market at all time.Some days ago it was called a ''tape reading''.But guess about the direction and you`ll be freaked,guaranteed.

Again, not trying to predict anything in advance....

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