Dow Theory Trend Detection with Confirmed Price Pivots

Summary

This trend-following strategy applies Dow Theory structure by detecting confirmed pivot highs and lows, then comparing successive turning points. It identifies an uptrend when both the latest high and low exceed their predecessors, and a downtrend when both are lower. Until either condition is met, it retains the prior trend state. Entries are triggered when the trend state changes, with settings for automatic, long-only, or short-only trading and optional stop-loss and take-profit orders.

The document describes a pivot lookback setting and visual markers, but gives no evidence of trading performance. Pivot confirmation inherently uses later bars, so signals can arrive after a turn has begun; the lookback choice also affects responsiveness. Choppy markets may generate unnecessary trades and costs. The supplied backtest covers a short period on a two-minute crypto futures market, which is limited evidence for a method intended to vary across markets and timeframes.

Key ideas

• Successive higher highs and higher lows confirm an uptrend, while lower highs and lower lows confirm a downtrend.
• The strategy retains its previous trend state when new pivots do not confirm a direction.
• Entries follow changes in the confirmed trend state, and users can restrict trades to either side.
• Pivot confirmation can delay signals, and lookback settings may need adjustment by market and timeframe.
• The supplied short backtest does not establish broad strategy performance.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.