Here are some trend threads on TS to get a better idea of how to define a trend :
https://www.tradestation.com/Discuss...Topic_ID=30732
https://www.tradestation.com/discuss...topic_id=30775
A lot of smarter traders than you and I have tried to define it and in the above threads you have mmillar, Bamboo, ghkramer, waynechem and others trying to do so. There is really no need to start your own new definition of trend when the market is full of traders following each other in these definitions.
If you want a short summary, here it is:
1. about half the market is looking at a moving average trend
2. the other half may be looking at some trend lines (or zigzags, similar idea).
3. the calculation of trends can be made more precise by using the average true range function (ATR). The market often trades with an ATR stop. In practice, a trend would often stall or ends once the ATR trailing stop is hit.
If you like the idea of following a moving average trend, the following waynechem indicator based on calculating the area under the trending moving averages may be a start:
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{ TrendArea Indicator WAV 9/15/04 }
inputs: ThresholdArea(1500);
vars: BarCount(0),SlowMA(0),FastMA(0),
color(0),area(0);
SlowMA = average(close,15);
FastMA = average(close,5);
{ see if we have a new possible trend starting }
if FastMA crosses above SlowMA or
FastMA crosses below SlowMA then
begin
BarCount = 0;
area = 0;
end;
{ increment BarCount +1 if FastMA above SlowMA...
decrement BarCount -1 if FastMA below SlowMA}
BarCount = IFF(FastMA > SlowMA,BarCount + 1,BarCount);
BarCount = IFF(FastMA < SlowMA,BarCount - 1,BarCount);
{ multiply each individual area by its barcount }
area = area + AbsValue(BarCount) * (FastMA - SlowMA);
color = IFF(BarCount > 0,green,cyan);
color = IFF(BarCount < 0,red,color);
plot1(area,"Area",color);
plot2(0,"zero line");
plot3(ThresholdArea,"+Thresh");
plot4(-ThresholdArea,"-Thresh"); |
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