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Has anyone come up with a method of predicting a trend day or range day just looking at the OI cues, Implied Volatility, Initial Balance & Intermarket correlations of a Future contract. The whole purpose of classifying the day type is to use to for our benefit in making trading decisions, so waiting for the close to confirm the day type makes little sense to me.
I am keen to know if someone has thought in the direction i am looking at. Thanks!!!
Can you help answer these questions from other members on NexusFi?
Been working this problem for years and sadly don't believe there is an answer.
To me, trending is any period where higher highs and higher low's are happening, market can change from chop to trend and back to chop several times per day.
Play what's happening, don't worry to much about it and take your losses when it changes on you mid trade.
Perhaps we get easier definition by a mathematical expresion?
For example, a simple proposal:
1.75 wants to give weight to (Close - Open) than (High - Low), thinking that it participates more in the final solution. Anyone can choose other values, and even markets differ.
Normally you'll find a correlation between ToR and volatility and volume. And this could be another issue to discuss.
If one need to get some basic idea about the trending nature that is being exhibited by the price action of a given stock, then which particular indicator and indicator values should one be looking at ?
Suppose we use ADX to begin with, then can we just use ADX > 25 = Trending and ADX < 25 = Non Trending ?
Same way for other Indicators like ROC, Momentum, TSI etc.
Are there any agreed values for these indicators which indicates a trending vs choppy market state for that instrument in that particular time frame ?
using 3 or 5 min chart and putting 5 different moving averages lines from 5,10, 20 and I can tell the trend that is tradeable in a useful way and that is all that counts for me.
This is such a simple question, yet so difficult to answer. As a general idea i like to use the higher time frames such as daily and weekly using MA's, daily 8,21 , weekly 17 , 43 and monthly 6 and 10. And watching the daily high, mid-point and low to trade from using a smaller time-frame 5min for entries.
I think if there was a single answer that may present the holy grail of trading.
as like most things, it really pays to look closely in the details.
the generic definition "a large range expansion where the day opens near the low and closes at 80% of the high" tends to lead one to use daily bars in initially in data mining. what is lost is all the important price information throughout the whole day and leads to incorrect assumptions in the variables leading to trend days.
there are many tools to quantify this i.e variance ratios, runs test, hurst exponent as well as so many other technical indicators which fit your threshold requirement of a trend day. what also helps the proverbial needle in the haystack search is to also ask/think and determine the relationships that do NOT lead to a trend day? Are trend days really the best way to trade?
the best advice is to always doubt anything you read until you test it out for yourself. Your findings should jump out at you and you can develop the tactics accordingly to exploit the market traded.
