Trading With The Directional Ratio by John “Jay” Norris
Whether you trade long term, short term, or intermediate term,
you need to know the direction of the trend. Here’s a simple way
to find out.
If you are an active trader, or if you manage traders,
you probably already know the importance
of differentiating between a “trend trade” and a
“countertrend trade.” By using the highs and
lows on the chart to determine overall direction, it should be a simple matter to determine a market’s current
stance for a particular time period, be it 15 candles or 60.
However, once you add up the long-, intermediate-, and
short-term trends on the daily, 240-minute, and 60-minute
charts, the moving parts start to blur.
UP, DOWN, OR SIDEWAYS
To help gauge the trend on the different time frames, I break
it down into simple numbers. There are three things a market
can do: go up, go down, and go sideways; and there are three
different time frames to do it in: long term, intermediate term,
and short term. That’s nine directional determinates, or a
directional ratio, that when tabulated can help define trend
trades versus countertrend trades at a glance. Imagine how
this can help you in the decision-making process when
scanning multiple markets on multiple time frames in search
of familiar patterns and trade setups.