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trend break identification

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there are different methods to identify a trend break. Personally I like several confirmations. Here's a recent one , using  MACD divergence,  Moving averages and of course a trend line. This can work in multiple timeframes

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@elle,

Have you considered the 'Parabolic SAR'?

It can help to determine the price direction of the asset you are trading but it can also assist you in identifying when the price direction and the trend may be changing. It can help to identify possible trend reversals. 

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thank you @TrendFollower, I did once try it, but have found few indicators work for me. Those that I use, I have adjusted the settings , as you may note from the non-standard MACD. I do tend mainly to rely on Levels, lines  and moving averages

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Just out of interest @elle, would you have immediately shorted at the break of your line? If not, what other confirmation would you have waited for on the chart above? 

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Hi, @Nelsy-Boy, like I say, I prefer more than one confirmation. The trend line break is the "heads up" , with something this fast , I prefer some of the MAs to be on my side. If price crosses back over them , I know I'm wrong. The 150 EMA is my favourite, for me that usually confirms a change in trend

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@elle, I presume you get less of those false breakouts on the 150? Do you have a favoured chart time as well? I tend to just stick to the daily at the moment but any trades on the 150 for that timeframe are limited obviously.

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the 150 ema works well for me on most timeframes. Also I like to look at a lot of different things in different time frames

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I don't hold index trades overnight at the moment, these markets are too wild at the moment. I wouldn't be able to sleep !!!!

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@elle,

Fair point. Do you day trade indices then? If so are you short any?

Volatility can be great for 'Swing Traders'. They love it. Also day traders love it too. Sometimes positions can be open for say 30 mins and exited with a profit. 

May I ask what assets you do trade? 

Volatility provides opportunities to make bigger profits more quickly. However with this comes greater risk so risk management is crucial. One can lose capital quickly too! 

One key thing I have learnt over the years is to never sell in a panic because there is volatility. I accept at times deep pockets are required and any trader who does not believe this will end up exiting the position when they should not especially when trading a longer term trend. One must know what their 'Exit Plan' is and stick to their 'Trading Rules and Strategy' with discipline. If a trader has this in place then volatility should not be feared but embraced as it will provide opportunities that normally would not present themselves. 

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I also trade on the daily @TrendFollower and I note you go down to the four hour chart but do you ever look lower for a tighter entry or even exit price?  Once I’m in a trade I start following on the one hour chart to try and identify the turning point as early as possible.

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@Nelsy-Boy,

Yes there are times when I will go all the way down to the '1 hour' charts especially for Cryptocurrencies.

In terms of exit price then that would be when the trend reverses and my stop loss is triggered. I do not look at charts for exit price as this part of my trading is an automated process where I take emotion and fundamentals out of the equation.

Once I am in the trade then I do not start following on the one hour chart as I am not looking to identify any turning point as early as possible. It is only once the trend has actually reversed and the price action and indicators have confirmed this do I exit through a stop loss mechanism. Therefore there is little point in me trying to identify any potential turning points that may or may not materialise. I do not want to exit unnecessarily and only want to exit when the trend has reversed and no other reason. You may get 'false turning points' due to volatility, due to short covering rallies, due to shorts being closed due to stop losses, etc. All these things may lead you to exit what may end up being a very strong trend that has been hastily exited. Letting your 'Winners' run is crucial to my trading strategy. 

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On ‎28‎/‎12‎/‎2018 at 22:07, elle said:

the 150 ema works well for me on most timeframes. Also I like to look at a lot of different things in different time frames

 

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@elle,

That is interesting the 150 EMA. Yes, I know a lot of traders who use this with great success.

Moving averages tend to 'smooth' the price action data. I tend to use 20. 50, 100 and 200 day moving averages. There can be false breakouts which is a risk in solely using moving averages. A lot of people applying trend following strategies tend to focus on just the price crossing the moving averages. This would be very simple and too easy. For me I look at how the moving averages line is shaping up. So for example on a long trade I want to see strong curve upwards and for a short trade I want to see the moving averages curve move strongly downwards. This is what I did on my Gold trade recently. When the 20, 50, 100 and 200 are all sloping upwards like they were in Gold it shows me that the trend is far stronger and a much more robust entry point. I must admit sometimes due to momentum indicators and wanting to get in early I don't always wait for the price to cross the 200 as there are times when I enter a lot earlier.  The key is how the moving averages are sloping and more specifically which direction they are sloping. 

The MACD is very useful as it very useful for trend followers and to gauge momentum. I like the RSI too. 

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On ‎28‎/‎12‎/‎2018 at 22:07, elle said:

the 150 ema works well for me on most timeframes. Also I like to look at a lot of different things in different time frames

EURUSD  

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@elle,

I find looking at too many different timeframes can get a bit confusing and just too much at times. I tend to stick to 'Daily' and '4 Hour' timeframes. I may occasionally look at the 'Weekly' and '3 Hour' but my main timeframes are the 'Daily and '4 Hour'. At times it is just the 'Daily'. 

What do you if you identify a trend on the 'Daily' but find that the '1 Hour' is showing something different? What if you then look at the 'Monthly' and that too is not clear for you? Then you look at the '30 Mins' and that is showing different price behaviour. How do you make effective trading decisions?

For me you have to decide upon a timeframe to trade and then stick to it. Changing it if another timeframe offers better opportunities is fine but looking at too many different time frames does not make sense to me. However, I am willing to keep an open mind here if you can provide some compelling reasons how it can increase trading performance which can be quantified into greater profits then I am willing to look into.

Has any research been conducted which demonstrates greater trading performance as a result of looking at different timeframes?

The main question for me is how it can lead to more effective decision making in relation to entering trades? I think it would cloud your judgement and sometimes too much information can work against a trader just as too little information can. Finding that right balance which fits your trading strategy is key.

Therefore maybe you have a trading strategy that utilises looking at different timeframes. I would be very interested in understanding this if you have. 

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@TrendFollower,as most of @elle's charts are tick based it is useful to consider the differences between tick and time based charts. 

The x tick charts are not time based at all, like the old ticker tape a tick is notched when a deal is done (contracts traded) so a 200 tick chart means each bar signifies 200 contracts traded but does not reveal the size of the contracts (price roughly does that). So if you look at a x tick chart timeline you can see each hour span is of a different size depending on the number of contracts traded within the hour. During high volatility many bars are stamped within the hour while during low volatility there are few.

This means overnight the hour intervals are tightly packed (fewer bars with fewer contracts traded) while through the day they are expanded (many bars with many contracts traded) so the x tick chart is more indicative of actual price movement negating time and so negating long periods of sideways movement which encourages/demands the inevitable MA lagging that is associated with a normal time based charts during periods of low volatility. 

 

 

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In view of the previous comments, I would like to say the following :-

 

I have taken time to study different assets and the way they move and have found that " one size does not fit all"  . An FX pair will move differently to say an individual stock in any given timeframe. Also different types of Technical Analysis work differently in different types of markets. For instance , I have found that Moving averages work better in trending markets ( using them as support or resistance say ( Facebook one minute chart is shown as an example)) whereas they are not so good in tight range bound markets. Conversely oscillators that range between zero and 100 can be useless in trending markets ( they can stay "overbought" or "oversold" for long periods of time), although, they are good for spotting divergence.e

It is essential, in my opinion ( and that is all it is) to be flexible. I do not hop from one set of Technical Analysis to another for the sake of it, but adapt to the market conditions and asset I am trading. 

One person once said , a doctor or someone similar spends years studying to get where he/she is & now earns good money doing their job, if you think you can earn good money trading without putting in years of studying, you're wrong.

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I like your style @elle..and your charts. For a newbie like me, I appreciate all the contributions on this community.

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Guest Paul
On 29/12/2018 at 22:01, Nelsy-Boy said:

I also trade on the daily @TrendFollower and I note you go down to the four hour chart but do you ever look lower for a tighter entry or even exit price?  Once I’m in a trade I start following on the one hour chart to try and identify the turning point as early as possible.

Hi Thanks for this useful insight. If trading off the daily chart, how do you use the 4H chart for entries? Do you use the daily for identifying trend?

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recent trend change example $GBPUSD

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On ‎07‎/‎02‎/‎2019 at 11:02, elle said:

recent trend change example $GBPUSD

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now

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On ‎19‎/‎02‎/‎2019 at 19:35, elle said:

now

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The power of Trend Lines  ( oh and a fib )

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On ‎07‎/‎03‎/‎2019 at 12:20, elle said:

The power of Trend Lines  ( oh and a fib )

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& now ......

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