I use a different definition for my Intraday time interval. This is represented by the relationship between price and a short term regression indicator. Simply put, when price closes above the regression indicator, short term intraday bias = UP, and when price closes below the regression indicator, short term intraday bias = DOWN.
These are very clear, simple instruction for determining which way a market is moving directionally and makes it very easy to assess the inter-relationships of trending conditions across different trading time frames. The only question that remains is for how long will individual bar units on a chart close consecutively high or lower? And how do we change our characterization of the definition 'Trend' if we don't see consecutive higher (lower) bar unit closings?
If a bar unit closes inside the previous bar within a given time frame, then we can say that there is sideways activity occuring or trendless nature developing. Until a bar closes outside of the 'pivot' bar (where pivot bar is the bar that establishes the directional bias of that time frame) the market is effectively neutral in a given time frame.
We can take the definition a step further by establishing a hierarchy of the trading time frames in terms of the level of influence on market bias. The easiest way to describe this is by thinking of trading time frames (Quarterly, Monthly, Weekly, Daily, Intraday) as psychological layers in a market. These layers of time are all interconnected and reflect the collective 'voting' rights of all the different participants involved in any market. The larger the trading time period (Quarterly) the more influential or impactful is its meaning on the market trend, because it reflects an ever increasing number of votes because it represents more time (than say Monthly, Weekly or Daily time).
To illustrate all of the above lets look at the Weekly chart below:
The Green and Red arrows reflect the 'pivot' bar that sets the trend in motion by making a close outside the previous bars range (either above or below). I'm not concerned whether the pivot bar makes a higher low and/or higher high in the case of an uptrend. I'm only interested in the whether or not the weekly bar in question can advance and close outside the previous bars range to extend the trend directionally.
Let's do the same exercise for the Monthly chart below:
Each arrow, either green or red identifies the bar that extends the trend directionally by closing outside of the range (either above (green) or below (red)) of the pivot bar (the previous bar that extended the trend Up or Down).
The next chart establishes the monthly channel that represents the high and low price of the pivot month (the month that has either a red or green arrow underneath it from the chart above). The chart below is a day chart with the monthly channel overlay revealing the critical monthly highs and lows from the pivot monthly bar.
And lastly, I'm showing a day chart with the Weekly and Monthly channel overlay representing the weekly and monthly pivot bar as demonstrated above:
This is the macro-trend evaluation method. This is how we can develop market context from larger time frames of reference.
Now, we have to develop a tactic for anticipating the Weekly and Monthly transitions in trend. This is the piece that every positional trader looks for because it determines precisely the timing of the trade, your directional commitment to the idea and your positional risk. This is the component that offers the least reliability.
I was able to develop my ideas of macro-trend and macro-market conditions from the Weekly, Monthly and Quarterly pivot bars as established above, but I was struggling to develop a faster entry/exit procedure, especially when trading the futures. I've tried every indicator on the market and/or price pattern but none of these offer the same degree of reliability as what I'm about to describe.
This method came to me through Mark Fishers book; The Logical Trader. In it Mark discussed what he called the 'Daily Pivot' which was a representation of the trading days regression or mean +1 standard deviation derived from price or where the bulk of the days activity took place. I extended his definition to include where the bulk or mean + 1 standard deviation of trading activity took place, but over multiple trading days. I refer to this as my '3-day pivot range' or '3-day regression' indicator. This simple idea allowed me to develop an understanding for the market micro-structure or the trend of the market on an intraday basis and became the basis for my entry/exit algorithm.
I established my intraday time period of reference as the 15min interval. As a position trader I'm not as concerned about the minutiae of price activity. I am still very interested in the intraday auction process so I decided that 15min interval was the right balance for me.
The chart below shows price and the 3-day regression:
In this example, I've shown the 15min bar chart with the 3-day regression overlay. In this case, price trades above 3-day regression. Because of this, the market is said to be in an up-trend state.
But when price transitions below this 3 day regression the market is developing a micro-down trend condition:
As a positional trader, I use the markets transition and closing through the 3 day regression structure as a indication that the micro market condition or bias is changing from long to short. I use this initial layer to establish my market position in the context of the larger macro-time boundaries discussed above to manage the position and establish expectation. This completes the link and the entry-exit timing from Micro to Macro context.