How to Catch a Trend Early

Posted on Thursday, February 7, 2019 at 5:46 PM

Timing an entry price is a critical component for successful trading. To identify the optimal time to get long or short involves a setup or pattern that typically precedes an above average vertical move or trend. To quantify the odds for a breakout, refer to the combination of time at price and range length. Time at price is the horizontal measurement and range (high minus low) is the vertical dimension. The vertical measure is known as ATR (Average True Range). The horizontal calculation is volume at price. It is the price that buyers and sellers transact most often. It is the fair price.

Markets trend and consolidate; that is what they do. One of the most powerful pre-trend indicators requires two components. A consolidation phase precedes breakouts and after a large vertical move a consolidation phase often follows and the process repeats. The combination of above average time at price and below average range is one of the patterns professional traders use to make wagers.

The vertical dimension is simply high minus low. If the recent ranges are below average, it is an indication that a trend is near an end and often detects the reversal of one. When time at price exceeds the norm a trend or above average vertical move frequently occurs.

So, if your goal is to catch a trend early, search for markets that have below average day ranges over a five-day period and have spent above average time at price. The gold macrograph below illustrates this phenomenon.

Time at price is shown as the price that sticks out the furthest to right in each of these profiles. When consecutive days overlap and recent ranges are below average, a breakout or trend often ensues. Trends frequently begin after periods of below length and above average width or time at price.

John Seguin
Senior Futures Instructor
Market Mentor Mentoring, Inc.

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