Neal Weintraub (author of Tricks of The Active Trader, Trading Chicago Style, and Spread Trading) uses a simple way of measuring trend based on Daily Pivot calculations. It is published daily as the FREE! Trend Trader Reports for Futures, Forex, ETFs, and Stocks.
The Trend, She is not my Friend. Why is that? Because most traders trade against her. And she does not like that. Seriously, the Weintraub Trend Trader was designed to keep you out of no man's land. The area where no trend exists or where the risk to reward ratio is low. As you examine the work sheet, please note where there are two arrows confirming a trend. Be it long or short, a close must occur above or below two trend arrows to confirm a strong trend.
Now the question is how do I arrive at the trend change? It's simple. The short term trend is a three day moving average of the Daily Pivot (3x1). If you took the Pattern Trapper Trading Course you would know all about that. The long term trend is the Weekly Pivot (7x5). So we are comparing a short term moving average with a long term simple weekly average.
Remember, the 3x1 is a moving average of the Daily Pivot. If you are daytrading and the price of your commodity or financial instrument trades through the 3x1, you may want to stop and reverse.
Price > than 3x1 and 7x5...Buy
Price < than 3x1and 7x5... Sell
Price > above 3x1 but < 7x5...minor buy
Price < below 3x1 but > 7x5...minor sell.
If you choose to ignore these guidelines, you will be a counter trend trader. There is usually more risk associated with trading against the trend.
You can use the grid as a spread matrix too - buying strength and selling weakness.
Before you make your next trade, check out the grid and see if the trend is your friend!