Trendways

ABOUT TRENDWAYS
Credentials
The Trendways Model
Advisory Service

FX EDUCATIONAL
Brief tutorial in FX
Guide to TA
Why involved in FX?
A different view/a>
Trading psychology
The fisherman

SUBSCRIBERS' SECTION
Techs & Suggestions
Weekly Analysis
Intraday Comments
Abbreviations
Appendix TT Forum

TOOLS
Real-time quotes
US economic calendar
Globa calendar
Calculators
Timezones

CONTACT

THE MODEL
PRINCIPLES AND EXPLANATIONS

This is a brief outline of the Trendways model developed in the late 80's and applied in the Foreign exchange market since 1992. Before put into application it had already passed the most vigorous tests on a real market simulation basis on daily data covering the period 1985-1991. It is a hybrid model in the sense that it combines econometric time series analysis, some elements of Elliott wave theory and principles od SAR models. The model does not attempt to predict future moves but rather to maximise profits and minimise losses where applicable. Unlike some other trending techniques, it tackles rather satisfactorily the major problem of cumulative losses during long lasting consolidation periods. This has been achieved by an allowance for intra-trend trading moves in a way that it still is possible to cut down on losses or even make profits during such "unfriendly" consolidation periods. It also tackles efficiently the problem of many false breaks (not always) by allowing for new higher tops are new lower bottoms without necessarily interpreting such moves as a resumption of an earlier trend following a consolidation period. Model points are generated on a daily basis. For simplicity reasons let us describe these model points as a set of levels that follow market daily ranges from below (during an uptrend) or from above (during a downtrend). It is as if we had support or resistance lines respectively but instead of lines we have geometric curves. For each particular day there is only one such corresponding point. Just to illustrate the case, if a pair of currencies is in uptrend we are only interested in the support breaking point without worrying much about the respective resistance. If the daily market range exceeds (overtakes the model point, it is no more safe to assume that the trend remains intact and that the market move was only a random one. In this case the position is stopped. Whether we reverse automatically the position or not is based on a combination of parameters such as the respective model time coefficient, the distance already covered on that particular day, the existence or not of any sound trendline nearby etc. Counter-trend positions (contras) are sometimes taken at pre-defined model levels. However, it is recommended that novice traders or those trading on small margin should avoid such contras as they are the most difficult operation in the system. In addition, such contras cannot carry a stop by default (read also the Appendix page), hence a serious market overshooting may become very painful. The model daily basis levels (not to be confused with the model points) also yield take-profit target zones, therefore it is not always necessary to wait for a new model break before taking profit on a position. The position may be re-opened on that or any other future day in areas again derived through the respective basis levels in the course of the existing trend. The description would be incomplete if not pointing out that the model is dynamic in that it weighs the time element as one of its most important parameters. This is a basic difference with more static approaches which calculate the directional moves and retracements based on a static origin basis as well as static percentages.

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