New article What is a trend and is the market structure based on trend or flat? has been published:
Traders often talk about trends and flats but very few of them really understand what a trend/flat really is and even fewer are able to clearly explain these concepts. Discussing these basic terms is often beset by a solid set of prejudices and misconceptions. However, if we want to make profit, we need to understand the mathematical and logical meaning of these concepts. In this article, I will take a closer look at the essence of trend and flat, as well as try to define whether the market structure is based on trend, flat or something else. I will also consider the most optimal strategies for making profit on trend and flat markets.
This approach allows us to dynamically evaluate the change speed of the trading instrument trendiness degree. The animation below shows the dynamics of the increment probability density distribution for AMD shares relative to the reference distribution. M1 timeframe candles are used as a basis. The animation is built for 40 steps, 1000 samples. The block size changes dynamically depending on the current average volatility.
Unlike GBPUSD, the distribution of the AMD shares increment probability density is not symmetric to zero. The upward trend component is clearly present. This means that the trend continuation probability is slightly higher when an upward step is followed by an upward step compared to the case when a downward step is followed by a downward step. This means it is more reasonable to open Buy deals on such an instrument. In this case, it is possible to remain profitable even while entering the market at random points.
Author: Maxim Romanov
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