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Is Trend Really Your Friend?
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Is Trend Really Your Friend?

  #31 (permalink)
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squ1d View Post
Interestingly, your line of thinking is what leads to technical analysis being used by so many traders.

If you think about it, there could be collusion on market behavior by participants that don't even know each other - like everybody looking at a massive pivot and putting stops right above it.

Another way to see this would be to look at traffic and notice that most people are colluding into an orderly behavior.

Anyways, food for thought...

No - you are confusing self-fulfilling prophecy with collusion.

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  #32 (permalink)
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tigertrader View Post
No - you are confusing self-fulfilling prophecy with collusion.

Yes, by definition you are correct - collusion is a specific type of industry behavior. I'm just trying to make the point that what is random to some ("the market hunts my stops") is profit opportunity for others. If only I had Level 3 data

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  #33 (permalink)
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squ1d View Post
Yes, by definition you are correct - collusion is a specific type of industry behavior. I'm just trying to make the point that what is random to some ("the market hunts my stops") is profit opportunity for others. If only I had Level 3 data

You don't need level 3 data. Just take a look at CL from today and witness the back-to-back FBO set-ups in CL. Buy-the-new low or fade the sell stops( trap the shorts), and sell-the-new-high or fade the buy stops( trap the longs). These are the kind of set-ups you don't have to think very hard about.

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  #34 (permalink)
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That's what I usually do...
An infinite amount of ways to skin a cat in the markets.

Psychology > Strategy ≥ Money
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  #35 (permalink)
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tigertrader View Post
then there's the treasury market; its more like a monopoly. And different economic rules apply to a monopoly than apply to a cartel. Especially when the monopolist has essentially unlimited capital to support a market or decides it no longer want to

@tigertrader , given the relationship of treasuries to equities (i.e., the two sides of the yield coin), do you think a stock market is much like a monopoly too, and if so, how much of that is because of central banks?

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  #36 (permalink)
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Tunah View Post
that's why you don't chase after it if you missed it in the first place.

The original question really had to do with using trends for day trading. Agree that one could observe a larger time frame (i.e Daily) trend for context and to form a bias for day trading off a smaller time frame (i.e 5 M). That is what most trades do anyways.

Given that, how do you know if you missed it. More importantly, how do you know where or when it is going to end? Or even, how do you know a trend has started?

Let's forget about the standard answer of HH, LL, LH and HL, etc. for the moment and consider the run in SP500 since the lows of October 2011. Who on this board would have genuinely believed (if not predict) that this run would go this far for 22 months and seemingly non-stoppable. Did we miss the trend in Nov 2011, June and November 2012, or June 2013? When do one decide that trend is missed? Are we still in the trend or at the beginning of a move to 2000 and 3000 mark? Too many unknowns.

Average buy and hold during the last 18 months would have netted 35% or more. But not many would have held a position based on trend for that long because at every century level since the 1100 in October 2011, every new 100 point gain was a place for trend to end. People would liquidate and wait to buy pullbacks and end up chasing the trend to the next 100 level. Some are still in cash since then and still guessing the trend will end soon at 1700, no wait at 1800,...2000.

No one can tell when or where a trend starts, how long will continue or when or where it will stop. In contrast, for day trading, ranges have defined swings once a high or low swing is formed and can be traded with no more risk than trading the trend. The difference is that the range trading provides 70% availability of potential trades compered to the availability of 30% trend trades with a higher risk of whipsaw. That is one reason in addition to volatility that option traders love trading ranges for non-directional trades.

All these assumes the trader has the proper understanding of the market, trading knowledge, and proper tools.

Cheers!

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Last edited by aligator; August 7th, 2013 at 03:36 AM.
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  #37 (permalink)
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Tunah View Post
I thought every input is appreciated...

@Tunah,

Absolutely, many thanks!

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  #38 (permalink)
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aligator View Post
...More importantly, how do you know where or when it is going to end? Or even, how do you know a trend has started?

...No one can tell when or where a trend starts, how long will continue or when or where it will stop.

If that is the case then why did you write at the start of this thread that markets are trending 30% of time if you have no idea how to measure or evaluate the animal objectively? Just asking!

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  #39 (permalink)
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josh View Post
@tigertrader , given the relationship of treasuries to equities (i.e., the two sides of the yield coin), do you think a stock market is much like a monopoly too, and if so, how much of that is because of central banks?

@josh:

corporations issue stock

but the treasury issues bills, notes, bonds, and tips

and has a direct influence over over the supply of the market

they can only manipulate supply, but not demand

they can manipulate price, if they understand end-user demand elasticity

and in turn they can influence demand

much in the same way that a cartel manipulates commodity prices

ZIRP/ unlimited QE caused capital to chase yields in riskier assets

however, the Fed has no control over which assets are chased

they have much more control over treasuries

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  #40 (permalink)
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trendisyourfriend View Post
If that is the case then why did you write at the start of this thread that markets are trending 30% of time if you have no idea how to measure or evaluate the animal objectively? Just asking!

Good asking. Really, no need to say that is a frequently used stat for trend vs range, whoever measures it after the fact, and I am sure you have seen that before. But it has nothing to do with determining when or where these things start or end. They can not be measured before they happen, and that is really the point.

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