line study

I have the bare bones of a strategy, and thought I would post the IDEA here.

This is open for everyone to contribute to and there is plenty of room for open critique. After all, everything is really, really easy in hindsight. This is not my TE, but I am hoping that if there is a good discussion here that it cold slot into and help filter out some bad trades, and lead to some proper trades.



However. There are some Rules to this thread so take heed.

1) Images MUST follow the template.
2) Images MUST contain 4hr in red, 1hr in Aqua and 15 min in Gold- This is so EVERYONE can see the same thing and it is easy to interpret. The colours are chosen because they are easy to type into the properties section to change the colour of the trend and S/R lines. This is a practical reason as well as a visual 'all on the same wavelength' reason.
3) No berating others.
4) I am not an expert. I take criticism as long as it is constructive. The idea is that we learn together.
5) This is subject to change, this is about growing
6) ANY image MUST show reasoning. Posting a chart without explanation is pointless
7) exception to number 6... is when you are looking for clarification... have I put S/R in the right place, are my trend lines correct, is this an OB, IB, Engulfing, Doji, Pin bar... not that these are (at the time of writing) important, but they could well fall into this study - they are not important fat the offset.
8) IF YOU POST TRADES, IT HAS TO BE WHEN YOU OPEN THE TRADE, NOT AFTER. THAT IS NOT IMPROTANT - IT BECOMES A BACK TEST
9) IF YOU POST A TRADE, YOU HAVE TO POST THE RESULT. HOW YOU MANAGED THE TRDAE AS WELL.

These last two rules are vitally important

Overview of the study:

The basic premise is that price reacts around s/r and trend lines. Knowing where to put these, and when to trade off them is the biggest issue.

I am going to present in a series of images how I draw these in and show where I would take the trades, and how I would take the trades. These are for illustrative purposes only. EVERYTHING is easy when you look back and say, this is where I would take them, and where I would not. I am not hiding this fact. The purpose of the study is to FORWARD test. I invite EVERYONE who wants to, to open up a demo account of only $500 (rationale will be explained later) and help me forward test the study, and to improve and whittle it down.

You may agree, or disagree with this, and that is absolutely fine. If you are against this idea, I ask that you still take part in the study and test it out. I am not saying that this is correct, but I am saying that there is some spooky things that happen around these areas that can lead to some fantastic R:R trades (at the moment in hindsight, hopefully this study will forward test these)

I am not against the idea of using indicators to filter out trades, but this is not part of the study - at the moment. If you want to propose an idea, then please feel free and BACK IT UP with examples. We can always add it to the study.

All trades are taken off the 15 minutes chart, although I think this could be modified to the 30 min or 1 hour charts if needed, I have not looked at this, but in theory, this should work just as well.

Trade management (for me)

I MUST have a SL and TP. When a trade goes to 50% profit, I change to a BE trade. That is just me- trade management is an area where we need to test and test some more. SL are movable - ie, you could just say that the SL is static, 5 pips for instance, or you can put beneath/above S/R lines, or at Structure. (the S/R lines are at points of structure in any case) or above/below wicks of the nearest candle. It all depends on risk.


UPDATE - Template added
UPDATE 2 - Template updated with indicators (spread and news) Very useful! Also added the two indicators I always have on my charts.

I am going to show you how to put your trend lines an s/r on your charts.



Start with the 4 hour chart and zoom out as far as possible

Place your trend lines on the chart in red, as attached.

Then starting at the highest point, place your resistance lines (this is any peak on your chart. They need to be OBVIOUS. Don't worry about if there are the same width apart, or if they are close together or far... just work your way from the highest point on your chart, and work to the right. Then go back from the left and fill in any support lines (I have pointed this out in blue, but the line is still in red) Your chart should look like this when fully filled in.




Notice that on the chart, there is actually only 2 new lines added (support lines where the lows happen)… could it be that they were right all along that Support turns to resistance, and vice versa?

Move down to the 1 hour chart and repeat the process. Keep FULLY zoomed out. Just shift your chart with the little red arrow so you have price away from the edge of the chart.

You need to change the trend line and the horizontal line properties to Aqua to distinguish them.

Your chart should look like this:



As you can see there is only 1 additional S/R line that I added in here.

You can tailor the accuracy of the lines here.

Then, shock horror....

Do the same with the 15 minute time frame. Repeat the exercise in gold.

Your final chart should look something like this:



It is really important to do this from a fully zoomed out position, as it helps to filter the noise.

WE are looking for OBVIOUS S/R here. OBVIOUS trending prices.

If you have to think that maybe it isn't... then it isn't obvious.

Once you have filled in all the points... you get to zoom in and have a look at your handy work.

Your first job is to have a look and see how price reacted at all these levels... run back through your charts and have a look.

I need to go for a drive to a meeting now, but I will leave you with this as an indication of where I can see the trades. I will post the rules for entry later.

For now have a look at the charts, have a look through and try to see If you can see trading opportunites.

You can try on any pair, I have only looked at the GBPUSD and EURUSD so far.

All charts here are posted on the EURUSD.

Enjoy:

OK, drive over, and waiting to go in..

SO entry rules.

I treat price a bit like a petulant child. Most of the time it is behaves well enough... you can quite happily walk down the street and the kid holds your hand, and it is plain sailing.

For no reason what so ever, the kid can decide to kick you in the nuts for no reason and leg it.

It is the same here for entry prices.

When price is behaving properly and with RESPECT, then we have nice and easy entry rules, and when it does not do as we expect then we have to amend those rules to bring it in line. Anyone knows that if we try to make the kid bend to us, it will resist all the more, and likewise we need to do the same with price.

How does this relate to price?

I will use the above image - slightly amended..

We expect price to respect support and resistance.

I think this is pretty much universally accepted, and we will base the following explanations on this premise.

#1) Price has NOT respected support and resistance. It has broken through this area, so now the support becomes resistance. We would be foolish just to take a trade based on it breaking resistance, so we wait for it to create the HH (just above resistance), let it come down to make a higher low and we place a pending order on the highest point - ie at the top of the wick.

This is an ABC pattern.

I have shown this on the trade. A - HH. B- HL - C pending price, break of A.

#2) This is an area where price is RESPECTING the resistance level. You can do one of three things here.

Hmmm not sure what I did there... but don't want to rewrite the above post so I will continue here!


#2) This is an area where price is RESPECTING the resistance level. You can do one of three things here (Just for clarity, the second candle of the three hits the resistance line and then retraces.)

a) Be really aggressive and take the first red candle close.

b) Be a little conservative and take the red candle after the retest, you could put a pending sell stop order at the lowest point of the three candles.

c) Take all of the red candles in the boxes.

Personally, I would definitely take the first red candle. Would I take the second set up here, and maybe the third. the petulant child is saying I want to have a tantrum, but don't really want to run away...

#3) This RESPECTS the support line, so happy to take the buy on the close of the green candle. By my rules, this would be a breakeven trade.

You could take the bounce again further along..

#4 (ermmmmm the first number 4... just realised I put two number 4's haha!)) Resistance is RESPECTED (and we would be pretty confident with this trade looking left at how price has reacted)

#4 (number 2)) Support line is RESPECTED, easy trade.

#5) Resistance is RESPECTED, easy trade again.

I will post some more examples on a different chart. The process will be EXACTLY the same, and the rationale will be the same for entering or not.

Great work! happy to follow you

Do you use the trendlines for entrys? or for trend direction for your trades?

Having a look at the GBPUSD chart.

1) Price RESPECTED SL 5 TP 17

2) Price RESPECTED SL 6 TP 16

3) price RESPECTED SL 4 TP 18

4- 7) Price RESPECTED

TOTAL SL 27 pips

TOTAL TP 65

(these are all the trades combined... far easier!)

8) Price respected the trend line, although probably a non trade, as R:R is not great, unless you wanted to target the 15 min as opposed to the `1hr Suport line... but why would you?

Salmon area, no trade as there was no retest of the break.

9 - 13)

TOTAL SL 35

TOTAL TP 200

14) Would you take this trade... a massive wick on that candle, not the greatest of candles, as it is saying that price is being very disrespectful to what we would want as parents... I mean traders... If we were to enter this, our trade management would have to be very aggressive.. I would oprbably not take it...

Hopefully you can see where this is going...

I believe that they are just as relevant for using as support and resistance, however I would use them more as a guide to stay out of a trade rather than using them to enter a trade.

I would definitely use them to exit a trade though.

I don't really have entry methodologies for trendlines, but would be interested to look more at them to see how they pan out. The entry would probably be just the same - as long as price respects what it should be doing..

As you can see from the post above, there is an entry based off the 15 min trendline, but the trade is not great, as it cuts back from the R:R. If we are getting confluence with a S/R line, then we should be even more confident in our trading decision to enter.

They are there as guides and improving our decision making. Again in the image above, you can see that trade 14 was quite close to two trend lines- the 1hr and 15min, so this would be another factor in decision making to enter into a trade or not.

Okay i understand. Thank you. Your charts look very clean

I will test this and when i can draw the lines good i will forward test this with forextester. I think the hardest part will be to find good exits

Yea trade 14. doesnt look like the one we should take. much buying power in this red candle. I think to wait for an Engulfing is really good. Or bad because we loose some RR.

USDCAD Study.

I think you should be able to work out why and where the trades were entered...

i love trend-lines trading but i never success trading it

just to let the newbies know, you can't win

cheers

I will try.
Support from the H1. Buy at the first green candle.

2 Buy because of teh Trend up. The sell seems to be low because the green candle breaks trough the resistance. The last swings from the resistance couldnt go really low.

3 Again no reall sell Price action and above only resistance from M15.

4 Sell because big engulfing candle

5 i woudnt take this one. the red candle dont show a real bias i think.

6 buy trade. only the wick of the red candle was not able to go through the support line. But again i think not a good trade when i see it live. because the small green candle.

Thanks for the input.

However to the 'newbies', I think what he meant was 'HE could not win'. I think it is really important to point out that this is someone who has not tried, there is no effort, no hard work applied. This is where champions are made.

As I said at the beginning, I am more than happy for everyone to contribute, good or bad, but just a generalised 'it can't be done' is really quite a cheap and pointless comment. I would rather have a 'look at point a, point b where this FAILED, where I have overlooked something obvious'. Where the trade rules have not been applied. Forward test the entry conditions etc.

Again, I point out, that this is a STUDY. I want people to get involved to prove or disprove, so that we can all comment and critique, improve and implement.

Dico has attempted none of this, so we can safely disregard it. He may well be right, but without any empirical proof, his point is moot.

1. Support from the H1. Buy at the first green candle. Price has respected the support lines

2 Buy because of teh Trend up. The sell seems to be low because the green candle breaks trough the resistance. The last swings from the resistance couldnt go really low. Price has disrespected the resistance line. We go into parent mode and bring the child back to us. It is an ABC pattern - which puts a pending price at A, if C happens, we enter the trade. This is a classic resistance becomes support.

3. Again no reall sell Price action and above only resistance from M15. Same as 2. Although, this is not really as cut and dry. This may have been a SL, as without checking how the candle played out, it may have gone to SL.

4 Sell because big engulfing candle Price has respected the 1 hour trendline (very important) and respected the 15 min Resistance. This would be a really easy trade to take in my book

5 i woudnt take this one. the red candle dont show a real bias i think. I agree with this. price has not respected support. My thinking was that there has been a big NO NO by the buyers, and it is more to do with the green candle closing above the support line- which would be more of a respect. The kid thinking he could run away, but gets cold feet and gets scared, and runs back to Dad...

6 buy trade. only the wick of the red candle was not able to go through the support line. But again i think not a good trade when i see it live. because the small green candle. Price respects support.


There is more going on than just a simple engulfing, or big/small wicks, it is the overall picture. You take a look at trade 6, and there is no big push to the down side. If anything, there is uncertainty just generally around price. The green candle looks to be the first certainty in quite a while, bang on respecting support.

thanks for the Answer. Much to learn for me After reading your answer everything makes sense. I hope in some time i can see it like you.

ok lets prove it

this is the basics of trading trend-lines
take the picture below, in (1) we have a trend line broken then a retest = back down to where the trend start
in (2) we have the same thing as in (1) and we are trying to follow the momentum



lets see where it goes

OK, so want to stress that this is not the usual account I trade off, as you can see the Spread on this account is really quite big...

But to give some examples of trades.

2 have just triggered.

One on the GBPUSD and one on the AUSUSD

I am expecting price to respect the relevant levels and move to the TP levels. as mentioned, once we are 50% in profit, we can move to a BE trade.