Assessing Intraday Trendiness

Brett N. Steenbarger, Ph.D.

www.brettsteenbarger.com
Each day the Weblog posts a trendiness measure that captures the trending qualities of the
previous days trading. The basic logic behind the trendiness measure is that shifts in a
markets directional persistence precede actual price changes. Prior to outright declines,
markets lose upside momentum and vice versa. The trendiness measure looks at
directional movement over the past day and compares it to the days total movement.
The result helps alert us to shifts in the short-term trend. It is also particularly helpful in
identifying non-trending markets.
Below is the Trendiness measure, as posted to the site:

Note that downside trendiness has tended to precede price lows, and upside trendiness
has tended to precede price peaks. Note also during the most recent price period, the
trendiness reading stayed between 2.5 and +2.5 for most of the time, keeping us alerted
to the non-volatile trading environment.
Having found some success with this measure, I decided to construct an intraday version
that might assist with shorter-term trading. The logic behind the Short-Term Trendiness
measure is the same; instead of looking over a past day for trending behavior, it evaluates
a 45 minute lookback period.

Below is a chart of the Short-Term Trendiness measure.

Once again note that the trendiness reading tends to bottom prior to price lows and peak
prior to price highs. In a non-trending environment, the amplitude of the peaks and
valleys in the measure are quite similar; in a trend, we see the trend measure make
distinct peaks (bullish trend) or valleys (bearish trend), with countermoves bringing the
short-term trendiness toward the zero line prior to reversal.
Thus far I have found these trend measures to be more reliable in identifying relative
price extremes than conventional indicators, such as RSI and Stochastics. I will be
investigating applications of the measure to a variety of markets in coming weeks.
Brett N. Steenbarger, Ph.D. is Director of Trader Development for Kingstree Trading,
LLC in Chicago and Clinical Associate Professor of Psychiatry and Behavioral Sciences
at SUNY Upstate Medical University in Syracuse, NY. He is also an active trader and
writes occasional feature articles on market psychology for a variety of publications.
The author of The Psychology of Trading (Wiley; January, 2003), Dr. Steenbarger has
published over 50 peer-reviewed articles and book chapters on short-term approaches to
behavioral change. His new, co-edited book The Art and Science of Brief Therapy is a
core curricular text in psychiatry training programs. Many of Dr. Steenbargers articles
and trading strategies are archived on his website, www.brettsteenbarger.com