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     qqwertyuiop2000
Member
Username: qqwertyuiop2000
Post Number: 1
Registered: 07-2006Rating: N/A
Votes: 0
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| | Sunday, July 30, 2006 - 09:10 am: |  
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Hey guys I have a question that some og you more experienced hands can help me. I picked up technical anaylsis during the summer break (im a uni student) and read a couple books on the subject (Guppy and Louise bedford. This stuff makes sense to me, but what I am having problems with is two things and I use woolwoorths (wow_ax) as an example
There are two significant periods where the shares trend is going side ways from december05-febuary 06
and from April 06 to june 06. In both periods we can see significant support and resistance lines.
What my question is there are numerous times in these periodes that the 15 day moving avg crosses the 30 day moving avg and further confirmation is given by the Trix signal upturning from zero and crossing the signal line. However these breakouts were all false (I think theyre called whipsaws?)Whilst jut a few weeks later the same signals were given and it was a true break out ?
How do I tell the differences between a true break out a simple a continutation of it moving side ways (beyond looking back in hindsight  ?
wow thats a long post-I would be really appreciative guys
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tryhay
Member
Username: tryhay
Post Number: 226
Registered: 09-2005
Rating: N/A
Votes: 0
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| | Sunday, July 30, 2006 - 06:18 pm: |
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Hello qqwertyuiop2000 ~ looks like you have spent too much time on an IBM keyboard there. I'm not so much an old hand around here but have some ideas to share...
No matter how many books you read you can't assimilate the information until it is meaningful in your context ~ and wow_ax is a classic example of accumulation (consolidation)and trending higher (until one gets to the bend at the end as NS used to say).
The weekly chart below shows how over the last 2 years WOW has been in uptrend but on occaision it has had to consolidate (take 2) before blasting higher. For example between March 05 and October 05 WOW consolidated the 'regulation 4' times before breakout, so the time to buy was when it respected the $15.50 level and started to bounce up.
Currently the Share Price looks to have run out of puff and may even drop below the $18.50 level. If it has no respect of the 200Day Simple Moving Average (the green line) then it isn't a good time to buy in and might even be the time to short the stock as the long term average rolls over.
The fun thing about trading is you have to trade the cutting edge and not observe the past from the comfort of the arm chair (as we are doing just right now).
The best lesson I have learned is when the indicators start moving south it is a good time to bail from the trade ~ as you can always buy in again when they start their NNE tack. At the moment WOW looks like it is consolidating rather than rolling over ~ but worth watching before you were to buy in 
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msparks
Member
Username: msparks
Post Number: 600
Registered: 10-2004
Rating: N/A
Votes: 0
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| | Sunday, July 30, 2006 - 06:46 pm: |
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Hi Unistudent
I don't thing you can tell the difference between a true break and a false break.
If you could , it would not be much fun would it, because everyone else could too, Right ?
If you were trading WOW when these false breaks were happening , the stop loss would have to be wide enough to keep you in the trade but not so wide as to lose you too much money if stopped out.
Long term , short term or day trading ?
This is how a very quiet IC member of late would do it, doesn't look that hard in hindsight.(H)
Are you trading a range, or a trend ? A ranging market requires different strategies than a trending market.
All those little bits add up to a lot, thats why so many on IC are multi millionaire, retired, part time traders. 
Is it doable? you would have to zoom in on each section and see for yourself, maybe only one of these trend following trades would have worked out, that would depend on your stop loss level, automatic or end of day, weekly close, or intraday, no wonder there are so many books with so many ways to do it, which one is right, which way works, there is only one way to find out , Right !
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qqwertyuiop2000
Member
Username: qqwertyuiop2000
Post Number: 1
Registered: 07-2006Rating: N/A
Votes: 0
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| | Sunday, July 30, 2006 - 11:16 pm: |
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First off let me say thanks guys for the response and so quick -I posted this morning and got back and there was already a response.
Tryhay I agree need more sleep mabey 
I agree its really easy to go back inhindsight and say "yeah that was obvious". Now your going to have to pardon me alittle but what is 'regulation 4' and "NNE tack". Okay I get it its still in a long term uptrend since august 04 and all those periods I mentioned before were simply consolidation periods.
My question is then between november 01 and august 04 the stock was simply ranging sideways, how would i identify this at the time as opposed to a true trend?
Msparks I agree that would mean the EMT would be true (I did a finance subject or two in second year uni , So as I asked before assuming I was a position trader timeframe-weeks to months- would I be forced to compare the share against the overall market to identify if it was ranging or trending? What tools would be more useful in a ranging market?
(Thanks guys for the input its really nice for some human interaction instead of a book haha)
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kaveman
Member
Username: kaveman
Post Number: 94
Registered: 11-2002Rating: N/A
Votes: 0
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| | Monday, July 31, 2006 - 12:07 pm: |
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Indicators give a value for today compared to what has occured on the price chart over a set period. eg moving average over past 30 days or whatever.
This means that if the price is going sideways for a while the indicators will only show the variations based on the current range. makes it very hard to pick when the actual major break occurs, but that is why any trading is based on probabilities of outcomes. With sufficient profit/loss returns ratio and good stop loss, and the self discipline to follow your system, you should come out ahead.
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qqwertyuiop2000
Member
Username: qqwertyuiop2000
Post Number: 1
Registered: 07-2006Rating: N/A
Votes: 0
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| | Monday, July 31, 2006 - 05:17 pm: |
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Kaveman thanks for the response- So are you saying that there is little in the way of separating a trending market and subsequently trending share as opposed to a full blown trend?
Probability of outcomes I like that almost sounds like gambling Just kidding
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kaveman
Member
Username: kaveman
Post Number: 95
Registered: 11-2002Rating: N/A
Votes: 0
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| | Sunday, August 06, 2006 - 01:34 pm: |
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The length trend you are looking for will as a general rule depend on the periods you use for the indicators. This assumes that a longer term trend will take longer to form and require a longer term indicator to detect. eg the volatility of a 5 day MA will be higher giving you many short term trend sognals than a 50 day MA
But saying that if the price moves sideways for a long time then you will get crossing of the 50 day MA that are not really the start of long term trends as the MA flattens out to reflect the price movement. Another factor is if the short term volatility of the price increases sufficiently then you can also get crossing signals that only reflect this volatility and not trending movement.
Just my thoughts
What you come down to is testing your theories and using the probabilities of a a positive outcome according to your sigals. If your tested profit exceeds the losses then your signals return a positive outcome.
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nightstalker
Member
Username: nightstalker
Post Number: 1147
Registered: 04-2004
Rating: 
Votes: 2
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| | Sunday, August 20, 2006 - 08:01 am: |
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Having been absent from IC for several weeks for various reasons, I checked back in this morning and found this interesting question.
One indicator I find useful, as a confirmed trend-follower (till that bend at the end, as Tryhay referred to above) is the ADX system (Directional Movement System).
This tells you a few things - it tells you if there IS a trend, or not, it tells you the DIRECTION of the trend, and it tells you the STRENGTH of the trend.
There are three lines - the DI+, the DI- and the ADX line itself. The DI lines are Direction Indicators, with the + being an uptrend, and the - being a downtrend. So, if the DI+ is above the DI-, then the trend is UP. And vice versa.
The ADX line itself tells you nothing about the DIRECTION of the trend, but it tells you the STRENGTH of the trend. A rising ADX line tells you the trend is increasing in strength, and vice versa. If the ADX line is above 25, then it signifies a trend of reasonable strength, the direction of which is determined by the relative positions of the two DI lines as mentioned above.
The ideal setup for a breakout into a probable UPtrend, is when you get the DI+ ABOVE the DI-, with the ADX line heading upwards and just crossing up through the DI-
Above is an example, using WEB from last year. You can see that the ADX system shows the green DI+ line rising above the red DI- line at the beginning of the chart, and the blue ADX line is just crossing up through the DI- line. The uptrend is now in place, and increasing in strength as the ADX (blue) line rises.
Then, around 3rd Oct, you can see the ADX line turn down - the trend weakens - and shortly after that, the DI- (red) line crosses above the DI+ (green) line, indicating a DOWN trend. Around 7th November, the ADX (blue) line starts to rise, showing the DOWNtrend is now increasing in strength.
As always, it helps to use 2 or 3 indicators rather than just relying on one, but I find the ADX system can help tell when sideways range-trading is changing into a trend. In range trading, with NO trend, the red and green lines will be crossing back and forth over one another, and the blue ADX line will be meandering along below the 25 level, like this:
This is using your example of WOW, from Jul'05 to Nov '05. You can see the ADX system (second from the bottom) meandering along showing no trend, until the end of October, when the setup looks like the start of an uptrend - green above red, with the blue just crossing up through the red and heading upwards. I.e. - an uptrend increasing in strength.
Hope this all makes sense, and is of help.
(Message edited by NightStalker on August 20, 2006)
Regards, NightStalker
"The trend is your friend till the bend at the end"
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