Trend trading

[novice]

Purpose

To discuss methods and techniques involved in trend trading.

Also to analyse different markets with the intention to trade them using trend trading methods. Maybe start with EUR/USD?

For reference (in general) trend trading would be different than day trading in terms of:
1. Holding period
2. Not trading counter trend

any comments or ideas would be welcome!

[Stringmine]

3 charts to consider:

Euro (March futures contract)

Chart #1a: The recent trend

Chart #1b: 13-01-04 produced a triple top intra-day, failure of support at 1.2708 and 1.2680, support then found at 1.2623 with a bounce back up to test previous support at 1.2680, a break up here and test of old support at 1.2708, followed by a failure to break out, back to support at 1.2623 leading to a down trend and clear channel forming. Based on this chart I would be buying at the lower channel trend line (or support - which ever came first) and selling at the upper channel trend line. However, with the main trend clearly defined (as down), it would be prudent to set a conservative stop loss below support if taking a long position on a break out of the channel and perhaps to reverse from the long side to short side if it fails to break back into the channel. Otherwise, a break back into the channel would provide a decent long opportunity (especially if taken at or near support) with a target of testing the underside of the upper channel trend line?

Chart #3: The British pound. It appears to be in ,much of the same shape as the Euro, with a clear channel that has broken to the downside.

Prima face, the charts don't look particularly good to the long side although personally, I would chance a long around here, near support with a target of the lower channel trend line, moving stops up to break even on a test of the trend line.

Short term, the euro and pound look bearish, medium term mixed but longer term - I think both are buys.

[eternalfuture]

Novice,

For reference (in general) trend trading would be different than day trading in terms of:
1. Holding period
2. Not trading counter trend

Please enlighten me about the first point.

Personally, how we 'trade the trend' may differ from one to another. I think each may has different time-frame. What's a trend for trader A may turn out to be a counter-trend for trader B. This could happen as a result of different time-frame used.

For example, euro/usd is in a downtrend for trader A, but for trader B, it could be within a counter-trend of the previous rally to 1.2898. Both are correct. The differences are due to different charts they look at.

Cheers!

[novice]

eternalfuture

Maybe I should have said longer-term trend trading.

Not trying to be too specific just in general terms:
1. holding period (longer than a week vs less than a week)
2. not trading counter trend (not looking for reversals)

It was just a general idea on how to class different method of trading using two cretia (i.e. time and style). There would be an infinite number of different combinations and styles. But I was just looking at one general method that would have many differnet variations.

Really it is not a issue. Just a way to focus on the market.

[novice]

Stringmine

I have noticed with the AUD/USD that to a large extent it takes it lead from the EUR/USD. For the GBP/USD do you look at it in isloation or in conjuction with EUR/USD.

How do you plan to get back into a short USD trade when the time comes? For exapmle divergences, falling momentum, trend indicator reversal?

[Stringmine]

I look solely at the trend, support and resistance. I often find I'm completely bogged down by technical indicators which can lead to me not taking the trade when I feel that I already have the ingredients in front of me - pure price action.

March futures contracts: Long from Friday 1.2360
I switched on late last night and saw 85 and thought "OK - the correction is underway" and left it at that. This morning it crossed over the channel (which was my target - or more exactly 1.2412) and I placed my stop at 1.2400 - managing to grab 40 pips on the trade. Once it hoped back out of the channel, I took a short and trailed a 15 point stop down to 30, adding another 70 to the trade. I didn't catch the bottom to reverse but it's currently at my *line in the sand* at 1.2356. As I'm not now totally sure where it's headed from here onwards, I'll wait.

[Stringmine]

I agree totally with eternalfuture in what is said about who's looking at what for a trend. The Eur/USD is in an uptrend longer term. Medium term, it looks mixed whilst being short term bearish.

Trading it over a longer time frames, I would be inclined to look at areas where stiff resistance had formed on the way up but was tested at least on one occasion for support and then perhaps building a position from there.

I should add that I don't usually trade for longer periods than a couple of days (which may be apparent from the chart I posted) but on the occasion where I've taken a longer term view, that is how I've played it.

How do you see the trend and how do you trade same?

[novice]

Stringmine

Time frames that I use (main tools EMA's and MACD-H on all timeframes)

1 Long term (weekly charts)

2 Medium term (daily charts)

3 Short term (30-minute and 5-minute charts)

EUR/USD as I see it

1 uptrend

2 downtrend

3 not relevant at the for the time being at least for me (wait for 1 and 2 to agree and then look for entry points)