detecting when a trend is ending ?

[AYMERIC75]

Hello,

 I am implementing an EA based on smooth moving averages (the four colored lines below) and I want to have another indicator to prevent to enter (long) when price starts to falter (i.e. to slow down, to be "out of breath" etc.)

Best way to illustrate this is with a chart:

So, is there an indicator that correspond to this : "the MA lines have diverged (following a big uptrend), but now, they are getting closer to each other (meaning the trend is "out of breath")"

(the indicator that you can suggest can also not be related to MAs lines, I just want it to indicate a faltering trend).

Thanks

Aymeric

p.s: I used tradingview for the picture here, but for my EA, of course, I use MT5

[William Roeder]

1. Until you can state your requirements in concrete terms, it can not be coded.

2. What about the lower left corner? It is identical to your red box. Do you want to enter there? What's the difference?
   

[AYMERIC75]

William Roeder #:

1. Until you can state your requirements in concrete terms, it can not be coded.

2. What about the lower left corner? It is identical to your red box. Do you want to enter there? What's the difference?
   

Thanks for your answer.

1. in (more) concrete terms: is there a indicator that indicates when an (big) uptrend is slowing down ?

2. at the lower left corner there is no previous big trend

[EDIT] the lower left corner would be a nice time to enter, yes... but I am looking for an indicator that tells you when NOT to enter (long)

[AYMERIC75]

I now have my own idea of which indicator to use, but before sharing it, I will wait a bit to see if there is any proposal :)

[Dominik Egert]

AYMERIC75 #:
I now have my own idea of which indicator to use, but before sharing it, I will wait a bit to see if there is any proposal :)

Ending trends can be detected by ZigZag indicator. Although a little lagging, but if the legs of ZigZag get smaller than the previous leg, this can be an indication of an ending trend. Also Tops and Bottoms of ZigZag can be used for range definitions.

[AYMERIC75]

Dominik Christian Egert #:
Ending trends can be detected by ZigZag indicator. Although a little lagging, but if the legs of ZigZag get smaller than the previous leg, this can be an indication of an ending trend. Also Tops and Bottoms of ZigZag can be used for range definitions.

I am not sure I understand what the legs of the zigzag are

But on tradingview I set the price deviation of the zigzag to 1% and got this:

it seems like if the zigzag crosses the weakest SMA downward it's a good indication not to enter.

[AYMERIC75]

My idea was to use Central Pivot Range.

In this video https://www.youtube.com/watch?v=5yVnbVE-vZ0&ab_channel=SwitchStats it is explained quite clearly. In particular the width between each line (lines are shown by groups of 3) is important, and a narrow CPR (3 lines close to each other) may indicate that a trend is going to happen. Whereas a wide CPR may indicate that the trend is already happening (and so it would be too late to enter).

To be even more precise, I could enter only if the lines are close to each other AND if the price if above them.

[Dominik Egert]

AYMERIC75 #:

My idea was to use Central Pivot Range.

In this video https://www.youtube.com/watch?v=5yVnbVE-vZ0&ab_channel=SwitchStats it is explained quite clearly. In particular the width between each line (lines are shown by groups of 3) is important, and a narrow CPR (3 lines close to each other) may indicate that a trend is going to happen. Whereas a wide CPR may indicate that the trend is already happening (and so it would be too late to enter).

To be even more precise, I could enter only if the lines are close to each other AND if the price if above them.

Well, whatever version you are using, as long as you rely on indicators, you rely your decision on past data and it's ability to give you a likelihood for the upcoming future. That won't happen...

And you are relying on cycles, won't happen either.

My opinion, price is driven by price(action)... Only the price can tell you where it is likely to go. Understanding what price is telling you has imho nothing to do with indicators.

So determining the decline of a strong move or trend is much easier than it's prediction of beginning.

A leg of ZigZag is one of the lines. In an up trend you would consider the leg from high to low in comparison to the length of the leg from low to high. As the delta between them shifts from negative to positive, you can confirm the move has declined and is likely to be over for now ...

Edit:

Relying on a cross of MA, or any xMA, is a question of optimization and has nothing to do with price action. - Won't perform.

I suggest to stick to indicators that work on pure price action, like ATR, ZigZag, Ichimoku and others alike.

All other indicators, well, arguably also ichimoku, but especially all the indicators with variable periods, should always be seen with healthy scepticism. They are prone to make you believe in what you see would be what you get.- Usually it's not the case.

[AYMERIC75]

Dominik Christian Egert #:

Well, whatever version you are using, as long as you rely on indicators, you rely your decision on past data and it's ability to give you a likelihood for the upcoming future. That won't happen...

And you are relying on cycles, won't happen either.

My opinion, price is driven by price(action)... Only the price can tell you where it is likely to go. Understanding what price is telling you has imho nothing to do with indicators.

So determining the decline of a strong move or trend is much easier than it's prediction of beginning.

A leg of ZigZag is one of the lines. In an up trend you would consider the leg from high to low in comparison to the length of the leg from low to high. As the delta between them shifts from negative to positive, you can confirm the move has declined and is likely to be over for now ...

Edit:

Relying on a cross of MA, or any xMA, is a question of optimization and has nothing to do with price action. - Won't perform.

I suggest to stick to indicators that work on pure price action, like ATR, ZigZag, Ichimoku and others alike.

All other indicators, well, arguably also ichimoku, but especially all the indicators with variable periods, should always be seen with healthy scepticism. They are prone to make you believe in what you see would be what you get.- Usually it's not the case.

Thanks for your reply.

For me, an indicator gives you a probability that something will happen, so of course it's never to be trusted 100%.

In general I agree with your argument that ZigZag relies on actual price and therefore is more reliable, in a sense, than an indicator with a lag (e.g. MAs). Here is an illustration of your comment on legs:

Regarding Ichimoku and why you would classify it as "working on pure price action", I am not sure to understand. Maybe, the fact that past minimum and maximum price is used to calculate the cloud, might make the latter more reliable than a MA, I don't know.... But min/max price is also used in CPR... so, which one is more reliable than the other, I still don't know :)

Regarding the use of MAs, you say that it's a question of optimization, I guess you mean that it can be used to set the level of entry or exit.

The EA I am building is an experiment where I want to test first the most obvious (in the sense "popular", but also easy to understand, it's a "bit" like the Occam's razor) indicators to decide when to enter and when to exit. When I look at a chart with MAs, my first intuition is to say : "the price does not go in all directions, there are trends, and when you are in a trend, the probability of staying in it on the next candle is higher than the other way around, and this should be made used of".

[EDIT]

Using ZigZag seems promising, I have the idea of using it this way in my EA: when the last up/down legs (triangle that point to the top) is an "uptrend one" (like the black one of the picture), then it is allowed to enter long. If not, then it is not allowed. But as you can see on the picture above it does not work in this example.

[Dominik Egert]

AYMERIC75 #:

Thanks for your reply.

For me, an indicator gives you a probability that something will happen, so of course it's never to be trusted 100%.

In general I agree with your argument that ZigZag relies on actual price and therefore is more reliable, in a sense, than an indicator with a lag (e.g. MAs). Here is an illustration of your comment on legs:

Regarding Ichimoku and why you would classify it as "working on pure price action", I am not sure to understand. Maybe, the fact that past minimum and maximum price is used to calculate the cloud, might make the latter more reliable than a MA, I don't know.... But min/max price is also used in CPR... so, which one is more reliable than the other, I still don't know :)

Regarding the use of MAs, you say that it's a question of optimization, I guess you mean that it can be used to set the level of entry or exit.

The EA I am building is an experiment where I want to test first the most obvious (in the sense "popular", but also easy to understand, it's a "bit" like the Occam's razor) indicators to decide when to enter and when to exit. When I look at a chart with MAs, my first intuition is to say : "the price does not go in all directions, there are trends, and when you are in a trend, the probability of staying in it on the next candle is higher than the other way around, and this should be made used of".

[EDIT]

Using ZigZag seems promising, I have the idea of using it this way in my EA: when the last up/down legs (triangle that point to the top) is an "uptrend one" (like the black one of the picture), then it is allowed to enter long. If not, then it is not allowed. But as you can see on the picture above it does not work in this example.

Right. I came to the conclusion, there are two ways to trade and selecting between these two is quite difficult. Ranging and Breakout. In one you go short, while in the other you go long. But it is quite difficult to figure which one to use.

Ichimoku, the 5 lines from the indicator are just 20% of the whole story. The guy who invented the system wrote 7 books about it and how it works. It takes into account something similar to Elliott waves and also it takes into account time as an essential parameter.

This is, I think quite something a lot of trading systems lack, the fact time. Ever thought how a chart would look like if you'd turn it by 90° and look at the candles like a stack that's building up? I am confident, time has a very valuable information to give.

Let's say we categories the market into two phases, ranging and trending, then this distinguishment needs to be quantified somehow.

There is the theory of cycles, that could be utilized for such approach.

Or another, totally different approach could be to ignore all these aspects and use a totally different way to find high probable trading levels or zones.

I am sure, if you look at that explosion bar and take a look at the ticks, the price jumps between them got bigger. Why I think this works is simple. Market is efficient. So price will be efficient. Think of it like a Bazar, when a buyer has a certain price level at which he makes a huge buy, offerings at that price level will be taken off and price jumps up to the next available offering. Now comes in psychology, people see, prices are rising, so everyone begins to rush at the next best offerings, eating up all the liquidity. This can be seen in the tick data. Before a strong move takes place and a fair value gap is created, a spike in ticks price differences can be seen.

This can be utilized to jump on.

---

Well, maybe you need a combination of multiple parameters, zigzag, range, breakout, Tick Details, time cycles, higher highs, lower lows. I am not so sure, honestly.

[zalzil123]

Hi everyone,

Everyone is busy with indicators why?

Think about it 

what is trading about??

I am attaching a GBUS chart for last week on the 1 hour.

I appreciate your opinion on it.