Once again, if you don't agree with me, that's fine, start a thread about it. Please don't post in this thread and contaminate it. I am not interested in your theories, if I was, this wouldn't have been posted in the journal section. If you have theories, great, I'm happy for you, start your own thread. Leave mine alone. If you have dissenting comments, that's great, post it somewhere else. This thread is not for debate, I don't need it, I don't want it. I know most of you out there lack professionalism, and so please, out of unprofessional courtesy, don't post your junk in my thread.
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For me, here are some basic concepts I have established for trendline drawings that I personally adhere to.
1) The Trendline must be explainable mathematically
If you have a choice between what "sounds logical" and the math, you should always pick the math. Math is unbiased, and we humans are anything but, so always trust the math over your personal judgment. The concept is that while we are drawing stuff on a chart, a chart is nothing but a pictorial representation of some math points and equations. Thus, if the math does not support what you are doing, you shouldn't be doing it. Sounds so simple, yet so difficult to do.
2) The Trendline must be self-proving
This seems to be a concept that most don't understand, and for me, that's not my problem. But the crux of it is this, there are concepts in logic and math, that allows something to be self-proving. If you don't know what these look like, I'm sorry fell asleep in math and logics and games theory class. But a trendline conforming to that which it is trying to prove, is like (in CSI terms) assuming that a suspect is guilty, and going out to look for DNA to prove he is; instead of getting the DNA, and letting the evidence prove or disprove your assumptions. Self-proving trendlines do so based on current price, and not past price.
3) Prediction is impossible, but increased probability is quite possible
Newtonian laws can be applied to a trendline. A body in motion (either uptrend or downtrend) tends to stay in motion (continues with the trend) unless stopped by an outside force. In FX, the number of outside forces are too numerous to count; but suffice it to say that if left unattended, the path of trajectory is the one that the price will take if all other external factors do not exist or if all other external factors cross-neutralize themselves. This is still the concept that trading on the trendside long term, then, is the more profitable side, and which side the trend is on, can thus be more confidently "betted" on, with the help of a trendline.
4) If you printed out the chart, applied the same rules, and drew your trendline, and then flipped the chart around again, and did the same, it'd be the same trendline.
This seems strange, until I noticed that most people have inconsistent rules, and also because they read a chart from left to right, thus a chart printed out, and then a trendline that was drawn upon it, would not be the same if the chart was flipped. If this is the case, then you probably are basing your assumptions on items in a chart that is somewhat manipulatable. The reason is, in FX, when you buy, someone sells, and if I reverse plotted a pair, then the relationship would be exactly opposite, and if you did not draw the EXACT AND OPPOSITE CONCLUSION from the reversal of the chart, you do not have a system that is consistent in decisions making and no trendlines you draw are consistent and cannot be used as part of your decision making process.
5) If you gave your exact set of trendline drawing rules to 100 people in a room, and they all had the exact same chart, they'd draw the EXACT same trendline.
This sounds easy in theory, but in reality, is quite difficult. If you do not have a set of rules that is repeatable by others, you really don't have a set of rules that is repeatable by you.
6) If you printed out 2 charts today, and drew a trendline on it.. and 2 years from now, took out the 2nd copy, and drew a trendline, your trendline from today would be the same as the one you drew 2 years ago.
The reason why this was added, was because, it seems that depending on "glass is half empty, glass is half full" feelings of optimism and pessimism, it might be possible to allow emotions to alter the interpretation of the ruleset. Also, current market knowledge might skew the trendline. But 2 years later, you might not remember what was happening on that day, at that time, and thus your "heat of passion" moments of drawing trendlines and your objective drawing of trendlines should match.
It has taken me quite a while to come up with a set of rules in which conform to all these.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
For me, here are some basic concepts I have established for trendline drawings that I personally adhere to.
1) The Trendline must be explainable mathematically
If you have a choice between what "sounds logical" and the math, you should always pick the math. Math is unbiased, and we humans are anything but, so always trust the math over your personal judgment. The concept is that while we are drawing stuff on a chart, a chart is nothing but a pictorial representation of some math points and equations. Thus, if the math does not support what you are doing, you shouldn't be doing it. Sounds so simple, yet so difficult to do.
2) The Trendline must be self-proving
This seems to be a concept that most don't understand, and for me, that's not my problem. But the crux of it is this, there are concepts in logic and math, that allows something to be self-proving. If you don't know what these look like, I'm sorry fell asleep in math and logics and games theory class. But a trendline conforming to that which it is trying to prove, is like (in CSI terms) assuming that a suspect is guilty, and going out to look for DNA to prove he is; instead of getting the DNA, and letting the evidence prove or disprove your assumptions. Self-proving trendlines do so based on current price, and not past price.
3) Prediction is impossible, but increased probability is quite possible
Newtonian laws can be applied to a trendline. A body in motion (either uptrend or downtrend) tends to stay in motion (continues with the trend) unless stopped by an outside force. In FX, the number of outside forces are too numerous to count; but suffice it to say that if left unattended, the path of trajectory is the one that the price will take if all other external factors do not exist or if all other external factors cross-neutralize themselves. This is still the concept that trading on the trendside long term, then, is the more profitable side, and which side the trend is on, can thus be more confidently "betted" on, with the help of a trendline.
4) If you printed out the chart, applied the same rules, and drew your trendline, and then flipped the chart around again, and did the same, it'd be the same trendline.
This seems strange, until I noticed that most people have inconsistent rules, and also because they read a chart from left to right, thus a chart printed out, and then a trendline that was drawn upon it, would not be the same if the chart was flipped. If this is the case, then you probably are basing your assumptions on items in a chart that is somewhat manipulatable. The reason is, in FX, when you buy, someone sells, and if I reverse plotted a pair, then the relationship would be exactly opposite, and if you did not draw the EXACT AND OPPOSITE CONCLUSION from the reversal of the chart, you do not have a system that is consistent in decisions making and no trendlines you draw are consistent and cannot be used as part of your decision making process.
5) If you gave your exact set of trendline drawing rules to 100 people in a room, and they all had the exact same chart, they'd draw the EXACT same trendline.
This sounds easy in theory, but in reality, is quite difficult. If you do not have a set of rules that is repeatable by others, you really don't have a set of rules that is repeatable by you.
6) If you printed out 2 charts today, and drew a trendline on it.. and 2 years from now, took out the 2nd copy, and drew a trendline, your trendline from today would be the same as the one you drew 2 years ago.
The reason why this was added, was because, it seems that depending on "glass is half empty, glass is half full" feelings of optimism and pessimism, it might be possible to allow emotions to alter the interpretation of the ruleset. Also, current market knowledge might skew the trendline. But 2 years later, you might not remember what was happening on that day, at that time, and thus your "heat of passion" moments of drawing trendlines and your objective drawing of trendlines should match.
It has taken me quite a while to come up with a set of rules in which conform to all these.
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