DAVID-

HOW DO YOU KNOW IF YOU ARE IN A TREND, OR IF IS SIMPLY A RETRACEMENT OF A PREVIOUS TREND?
SCOTT

Hi Scott,

There is a famous quote I am not sure said it but it goes like this:

Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for life. So with this in mind instead of me telling you whether we are in a trend or a retracement (I assume you are talking about the Stock Market) check out the following videos and lets try and get a discussion going with the community on what the answer to this is. Then I will comment on whether I am in agreement or not and others can do the same:

Lesson 2: An Introduction to Dow Theory

Day Trading Lesson 6: Multi Time Frame Analysis

Look forward to hearing yours and any one else's thoughts on this.

Best Regards,
Dave

hi Dave-

I didnt mean in the stock market, I meant at a chart in general..It would be bad to trade a double top strategy lets say on a chart if you were viewing a retracement not a trend....does that make sense..I guess my question is what constitutes a trend? IS it a minimum number of higher highs and higher lows? OR how would you filter that?
Scott

Hi Scott,

Thanks for the reply after looking at the question again I see it was obvious that you were asking this so sorry for the confusion there.

I will throw a different question out here to you and the community to help answer this which is do you think that you can have a trend that is part of a retracement?

Best Regards,
Dave

I guess I do not believe that you can have a trend in a retracement. I beleive that if you act as if every retracement is a trend, you will get whipsawed way to often. This is just my opinion of course., i could be wrong. If you visit. Top Dog Trading
The owner of this site states specific rules for when you are in a trend. one of which being the 50 period MA has to be upsloping in an untrend and downward sloping in a downtrend....Any comments?
scott

Hi Scott,

Thanks for the reply and for the link. Below are a couple of other links on how traders that I follow draw trendlines.


Drawing Trendlines from Tradermike.net

More on Trend Lines from Tradermike.net

Assessing the Validity of Trendlines from AfraidtoTrade.com

As you will see if you look around the web on this there are lots of different ways that traders will define trends that they want to trade which is the case with pretty much any type of analysis.

So with this in mind my opinion is that you cannot have one all around definition for what a trend is outside of what I feel is the fact that any trend no matter how it is defined is going to exhibit periods of higher highs and higher lowes in an uptrend and vise versa in a downtrend.

So with this in mind I think one could make the argument that there can be shorter term trends within a longer term retracement. Secondly as a retracement is generally defined as when prices trade in an opposite direction to the established trend for a period of time before turning and going in the same direction, a double top or double bottom formation could mark the end of the retracement just as easily as it could mark the end of a trend.

Thats my two cents am certainly open to other interpretations and hope to hear more from you and others in the community on this or anything else.

Best Regards,
Dave