Define The Trend and Trade The Trend

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Glossary Trend-following: A trading style that identifies the trend and makes trades in the direction of this trend.

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page 10 of Art Hill's Book:
1 Define the bigger trend.
2 Identify the smaller counter trend.
3.Estimate length of these counter trend moves.
4 Spot price action that signals the end of the counter trend.
5 Set Profit and stop loss levels to assess trade potential

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page 162 In an imperfect world, it does not make sense to use one retracement to anticipate the end of a secondary price movement.
Instead chartists can define a reversal zone.
A move into this zone increases the chances that the secondary move is nearing an end.
The natural starting point for the zone is 50 percent because it is between the two Fibonacci numbers 38 and 61% and the two Dow Theory numbers 33 and 66 %.
In fact 50 percent represents the sweet spot because it is the ideal retracement for a trend, taking two steps forward and one step back wards.
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These Zones are not fail proof. They mainly alert the chartists to pay closer attention to price action.
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Once the trade begins with a break out , and the trend is still in place.
A new high can be expected.

[TREND1]

Journal Page
Date and Time:
Security:
Long/Short:
Trade rational:



Market Conditions:





Entry Price:
Target price and reward percent:
Stop-loss and risk percent:
Reward-to-risk ratio:


On going adjustments and remarks:



Exit price and days held:

Winner: Actual gain versus projected reward:

Loser: Actual loss versus projected risk:


Trade assessment:



Key lesson(s):

[TREND1]

TECH you wrote on another board ..
Does Art provide guidance on intra day support breakage vs closing price support breakage?
His book uses daily, the important thing is his patterns uses
"BARS"
Art says in his book that any time frame will work.
example:
Art points out that a FLAG is from 5 to 25 bars
Interesting he says above 25 bars a flag turns into a channel,
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Art's book will change the way you look at the stock market ....
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I have the bible by John Magee dated May 25, 1974
Art's book dated April 10, 2013 covers the same material,
but the key point it makes it very clear and usable.

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page 107 A 50% retrace of a prior decline is healthy.
Two steps down and one step back up is healthy.

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page 107 A 50% retrace of a prior advance is a healthy.
Two steps up and one step back is healthy.

page 106 A decline back to the prior low would indicate that another pattern is taking shape.

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page 34 In up trend advances are primary and expected to result in higher peaks as the up trend extends.

page 34 In down trend , declines are primary and expected to result in lower troughs as the down trend extends.

[TREND1]

Define the Trend and Trade the Trend

Arthur B. Hill


$14.95

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page 64 A price gap should be considered in the context of the bigger picture.
A support break with a GAP shows weakness.
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IWM_3

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Page 112 Pennant are small consolidations that look like triangles. They are 5 to 25 bars. A bullish signal is triggered when prices break above the RED upper line.

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page 94
Up to now the book has covered both TOP and BOTTOM patterns.
The following two chapters will cover CONTINUATION PATTERNS

1 Rectangles
2 H&S
3 Flags
4 Channels
5 Wedges
6 Pennants
7 Triangles

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page 91-92 Calculating RISK going SHORT out of a pattern.
It is important to manage RISK.

(1) Sell short on the support break.
Set STOP_LOSS equal to 1/3 of the potential pattern.
This would set the REWARD to REWARD ratio of 3.

(2) Utilize the Throwback.
Use broken Support turning into Resistance.
Sell Short near new Resistance.
Throwbacks do not always occur.

(3) Throwbacks come in many forms such as
rising flags, rising wedges

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page 85 Example of OBV keeping you out of Bull Trap

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page 66 Use OBV to anticipate and/or confirm break outs and trend changes.
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page 66 Use OBV to avoid Bull and Bear traps from rectangles.

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page 59 Classical TA teaches us that broken Resistance turns into Support. And Broken Support turns into Resistance.

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page 59 Taking advantage of throwbacks
Classical TA teaches the broken resistance turns into support.

page 61 Throwbacks often happen after break outs.
Giving traders a second chance to buy because broken resistance turns into support.

[dDT]

Board marked TREND1 ... interesting !

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page 25 Traders have a much better chance of making money by betting on the trend continuations instead of trend reversals.
This is the essence of trend following.
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page 29 Though certainly not perfect, peak and trough analysis is often superior to moving average analysis for trend identification.
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page 31 How do we know when the trend has actually reversed ?
First sign of weakness is when the prices fail to exceed their prior peak.
A lower peak and a lower trough signals a down trend may have started.
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page 34 Dow theory asserts that neither the length nor the duration of a trend can be predicted.
In other words, chartists do not know if an up trend will produce a 30% or a 130% advance.
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pages 44-47 Rectangle BOTTOM
pages 77-80 Rectangle TOPS
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page 159
Estimating Reversal Zones
(1) Dow Theory asserts that secondary moves retrace 33% to 66%
(2) Chartist can use Fib Retracement of 38.2% to 61.8%

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page 1 To identify trades that make financial sense, traders need to answer the following questions.
1 What is the direction of the bigger trend ?
2 When is a good time to buy or sell within this trend ?
3 What do smaller counter trend movements look like ?
4 How do I know when a counter trend move is ending ?
5 Where do I set my profit target and stop-loss ?
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page 2 TA uses price and indicators to identify trends and forecast price movements in a tradable security.
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page 4 Indicators are lagging like moving averages.
Or leading like momentum oscillators like MACD
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While one or two indicators can enhance analysis, three or more will often distort the true picture.
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page 10
1 Define the bigger trend.
2 Identify the smaller counter trend.
3.Estimate length of these counter trend moves.
4 Spot price action that signals the end of the counter trend.
5 Set Profit and stop loss levels to assess trade potential

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Art Hill's book only mentions only two indicators
MACD
ROC
No mention of RSI
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Art Hill only uses price action.
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page 14 This may sound obvious, but chartist should not try to guess the top in an up trend nor a bottom in a down trend.
In other words , chartists should not second guess the market because these trends are there for a reason.
This reason may not be immediately clear, but it will likely manifest itself in the near future.

[TREND1]

Define The Trend and Trade The Trend is a book by Art Hill These are my notes on this book.