The EEdge-Trend Indicator
EEdge-Trend
Examining short term price action allows this indicator to plot the expected short term trend direction. By knowing this not only can a potential "bias" be the determined to keep us on the right side of the market, but only by knowing the current direction can a potential reversal area of the current direction be anticipated repeatably. With objective bias information comes confidence in trade direction and repeatability applying an edge.
EEdge-Trend
Examining short term price action allows this indicator to plot the expected short term trend direction. By knowing this not only can a potential "bias" be the determined to keep us on the right side of the market, but only by knowing the current direction can a potential reversal area of the current direction be anticipated repeatably. With objective bias information comes confidence in trade direction and repeatability applying an edge.
"Why is this useful?" you might ask. Well, Let's start here.
Merriam-Webster Dictionary defines Trend in the following way:
Why do we care?... Years ago when I was trading I started out with only S/R to trade. Sure, there was the price action to help guide as I entered or exited the market and when I hit the moves they were spot on. But when I was in the wrong direction I heard the sound on an oncoming locomotive and the clanging of the bell as I was quickly run over by being in the wrong place at the wrong time. I quickly noted in my after hours analysis that if there was a filter that would help identify direction, a bias if you will, it could eliminate my tendency to try to pick a top or a bottom since I would wait for some trend to be at least started before taking that direction. Like everyone, I started pummeling Google with searches on finding trend direction and finding trading bias. To my dismay there just wasn't much I could relate to. Sure, there was the theoretical and the overly simplified, but nothing clear enough that I could put into practice in my daytrading. So I started my own research on what makes a trade-able trend direction and worked out the details in Easy Language, Tradestations editing platform for indicators.
What I found out was that trend direction or bias is a tricky and complicated thing. What time frame are you looking at? A trend in one time frame is simply a pullback in another. So what evolved was EEdge-Trend. This watches current price action on a current time frame for some indication of trend. The way I try to trade this is only trading in the direction that is identified as the trend direction by the trend indicator. I used to love reversals because if there's nothing quite like picking an exact top or bottom of a move and hanging on for a big runner. Problem is, tops and bottoms are not typically pretty. There are fits and starts, swings and testing, sometimes lasting hours. If you're right on your timing it is great, but if you're not, cue the sound of the locomotive. Since I've had that realization I've become much more of a trend trader but not in a strict sense. I like to find a direction and stick to it or I find myself without a strong conviction either way and I end up flipping from one direction to the next, getting chopped up along the way. I trade less focusing more on trend setups, but reversals are still possible but riskier. Why try to stab at the riskier side? If you can consistently hit a trending market in the direction of the short term trend you have a better shot at having good trades IMHO. So if I can determine a bias, I'm much more relaxed sitting back and waiting for a setup in the direction of the predetermined trend. This way I'm not shooting at everything that might be a reversal, only to reverse when it bounces the other way. With clarity comes confidence. With confidence comes consistency. With consistency comes profits.
Merriam-Webster Dictionary defines Trend in the following way:
- trend, intransitive verb: "a : to extend in a general direction : follow a general course: b : to show a tendency"
Why do we care?... Years ago when I was trading I started out with only S/R to trade. Sure, there was the price action to help guide as I entered or exited the market and when I hit the moves they were spot on. But when I was in the wrong direction I heard the sound on an oncoming locomotive and the clanging of the bell as I was quickly run over by being in the wrong place at the wrong time. I quickly noted in my after hours analysis that if there was a filter that would help identify direction, a bias if you will, it could eliminate my tendency to try to pick a top or a bottom since I would wait for some trend to be at least started before taking that direction. Like everyone, I started pummeling Google with searches on finding trend direction and finding trading bias. To my dismay there just wasn't much I could relate to. Sure, there was the theoretical and the overly simplified, but nothing clear enough that I could put into practice in my daytrading. So I started my own research on what makes a trade-able trend direction and worked out the details in Easy Language, Tradestations editing platform for indicators.
What I found out was that trend direction or bias is a tricky and complicated thing. What time frame are you looking at? A trend in one time frame is simply a pullback in another. So what evolved was EEdge-Trend. This watches current price action on a current time frame for some indication of trend. The way I try to trade this is only trading in the direction that is identified as the trend direction by the trend indicator. I used to love reversals because if there's nothing quite like picking an exact top or bottom of a move and hanging on for a big runner. Problem is, tops and bottoms are not typically pretty. There are fits and starts, swings and testing, sometimes lasting hours. If you're right on your timing it is great, but if you're not, cue the sound of the locomotive. Since I've had that realization I've become much more of a trend trader but not in a strict sense. I like to find a direction and stick to it or I find myself without a strong conviction either way and I end up flipping from one direction to the next, getting chopped up along the way. I trade less focusing more on trend setups, but reversals are still possible but riskier. Why try to stab at the riskier side? If you can consistently hit a trending market in the direction of the short term trend you have a better shot at having good trades IMHO. So if I can determine a bias, I'm much more relaxed sitting back and waiting for a setup in the direction of the predetermined trend. This way I'm not shooting at everything that might be a reversal, only to reverse when it bounces the other way. With clarity comes confidence. With confidence comes consistency. With consistency comes profits.
Larger Time Frame Reference... Lastly, I try to watch a higher time frame just to give me some perspective. For instance if I see a trend forming on my short time frame (1000 is a good middle of the road tick chart for the ES), I glance at my higher time frame (I sometimes use a 4000 Tick bar chart for this) and see what is happening. Many times the higher timeframe will be in the opposite trend of the lower time frame. A trend move in a shorter time frame can be just a pullback or bounce in an existing trend in the opposite direction in the highest time frame. This will give perspective to know that even if you can trade in the short term direction, its power might run out and reversal when the higher time frame pullback/bounce is completed and the trend resumes. EEdge-Trend shows this nicely...
So in short, this indicator keeps me on the right side of the market and avoid the oncoming train. Quite an accomplishment for an indicator... Combining this indicator with the other complimentary EEdge Indicators increases the power of EEdge-Trend even more!
...part of the EminiEdge 5 Step Plan to Trade the Emini S&P...