Blondie,
Long time no see. You have asked the single most important question and the answer is an answer to Bob as well. A trend is the simplest of things, even a child can see it (although adults have trouble with it). In bullish trends, it is a series of higher highs and higher lows across a specified time frame. It can be a daily, weekly, monthly, hourly, one minute or one tick framework.
Higher highs, higher lows. In its classic form, one uses fractals (see Bill Williams' books on chaos trading and his site Profitunity) to identify when a stock is making a higher high. One can also use pullbacks from recent highs for entry (Dabummy's classic 3-5 bar pullback entry).
(Of course, the opposite is the case for bearish trends: lower highs, lower lows.)
How is this different from traditional TA you might ask (or Bob did ask)? Well, there are no predictions of Gann fan levels, Fibonacci retracements, pennant and flag breakouts, targets, etc. No patterns such as head 'n shoulders, cup and handle, bowl and saucer, camel and tent, no Adam & Eve bottoms or triple tops. There are no MACD histograms, no candlesticks, no volume studies, no convergences or divergences; no OBV, no TSV, no MS, no rainbows or leprechauns.
If you want to call looking at a chart and determining a fractal as TA, then it's a sort of TA, but it's the sort of TA that can be done on the back of an envelope. In some ways, strength of trend indicators (say, using the ADX) can be helpful, but perhaps simply using 20 day or 55 day programs can be just as helpful.
Maybe the classic form of trend following would be currencies. All you are doing is looking for the direction of one currency versus another, no management styles, no p/e, no EIA numbers, no d/e ratios, no fear of bankruptcy, no real intellectual property to exploit or protect. Pure direction, pure trend, or chop; or chop and trend; or trend and chop.
Nice to see you around Blondie; did you notice old timer's week over at Doggy's thread?
Kb |
