EURUSD only

M15 System - Explanations to Drawing Trendlines

Hi folks.. Today I will continue to briefly explain how I generally draw trendlines while trading the M15 chart for EURUSD.. (The idea can be applied to any instrument though).

Below I shared 3 different trading days in a row. My trading day generally begins with London Opening and that hour is marked with a vertical line on these charts. I picked a random date from an area around 2015.. Doesn't matter at all. What matters are the important facts that I will explain below. I hope you can study the charts and grasp more information from them.

Because everything is expressed as a whole on charts, it can be confusing to just look at the charts alone. I recommend you read my comments and check the chart again and again for each paragraph that I am talking about. Meaning: Read one paragraph of my post and then go check chart. Then read next paragraph and check chart. And so on and so forth. Let's get started:

DAY (Chart) 1

For any new day we don't need to know what happened the day before or where are all the important S/R levels on higher timeframes etc. are located. Those can help yes but they are really not necessary. Our job will be to check specific signs first which I have listed below:

The first thing I always check is: Where are the candles opening or positioned based on the GREEN MA LINE (60 Linear Weighted Moving Average, Shifted: 3). (You can also use the 55 LWMA Shifted: 5 as your settings. These settings will never be 100% perfect. It is only a guiding line to see the overall trend as quick as it gets).

My second check is the slope of the LWMA: If the slope is flat I know that it could require some time until a breakout or that I can expect the market to go sideways for a while. But it doesn't preclude me from opening a trade once a breakout occurs. I am simply waiting for the perfect moment because I know that market probably arrived at a decision zone.

Third check is London Opening Price: In our example right after London opening, new candles close higher. Therefore I would keep my previous long if any. But as soon as two red candles drop back below previous Higher Close (HC) Level, I would get suspicious and look to a place to close my long trade. It would be a cautious close for this case only. But because that the day right after London Opening started with a higher close I would still have a bullish bias,

4th check is closing or let runnning trade from previous day: Since I had a long trade already open here I would close it after a breakout from ascending blue trendline. The red trendline would be a too early breakout signal. I generally ignore red trendlines (steepest trendlines). I will explain soon why. Keep reading.

So now that I stated that I would have a bullish bias I would expect trend continuation. So with a breakout to below I would first close my long temporarily at the price I circled in red. (Yes I know I am giving back some of my profits but this case is really rare. Important is to stick to the system no matter what. Later we can improve these kind of situations with trailing SL, but overall it is really not important. In the longer run we always will get better profits.)

Drawing Descending Trendlines for Bullish Breakout

After I closed my long and started waiting on sidelines I am checking if I can start drawing a descending Trendline. So this part is the main reason why I prepared this post in the first place. Let's assume I am drawing lines from all potential highest swing high to lower swing highs. On chart 1 that way I could draw 6 different descending trendlines. Which one is the one we should refer to? All of them could be the potential real trendline? How will we know where the best breakout price is?

Here is the answer:

1. The RED Trendline, marked with number 1: This is a steep line and often I ignore the red trendlines. Those will cause you to cut profits early. Ignore!
2. The ORANGE Trendline, marked with number 2: For this line I look when it happened. This retracement happened after a Lower Close!!!! Don't start drawing descending trendlines in a bearish trend when you still have a lower close. So orange line is ignored as well.
3. The BLUE Trendline, marked with number 3: That retracement could not print a new lower close. Now we can start drawing our first trendline. That level could give us a correct angle. But it is not the only one. Next trendline also has such a function.
4. The GREEN Trendline, marked with number 4: If yu check market prints a new lower close first. Then it makes a little swing high. That level is already below the blue so we ignore. But then it makes a new low with the shadow but can't close lower. Then it makes a swing high and therefore that level also can be count as a proper place to draw the trendline. I did these two trendlines are both legit. (I put them into gray boxes on chart).
5. The PURPLE (Numbered 5) and BLACK (Numbered 6) Trendlines: I just put them because we can still draw more trendlines for every swing high. But these just make no sense anymore. So ignore them. But check out their breakout levels. Those levels are already similar to 3 and 4 and therefore we don't need them. We must focus on number 3 and 4 type of trendlines.
6. Now you understand why I also didn't use the red trendline to close long trade from previous day.

Okay, so since I have a bullish bias and I was waiting for a bullish breakout. Once that breakout occurs through BLUE trendline (Nr. 3) or GREEN Trendline (Nr. 4) I immediately open a long trade at one of these levels. And start watching what happens next.

 

1. I keep watching the candles and I notice that there comes no more candle close below the day's lowest close (or shadow) and I feel confident. I also notice that I opened my long just below London Opening price so I know that could buy low in this case which is what you hear a lot from pro traders: buy low.. sell high.. this is how you can do it.. Without a proper system like this nobody would feel like buying below London Opening.. but that is the trick. Buying low requires us to buy at weird places. You must learn to buy at zones that are out of your comfort zone. Feels weird but it is the only way to get a chance later to run away with minor loss if things go against you.

So.. for day 1 you now can study and try to understand why I am using only closing or opening prices of candles. Think of candle wicks as jumps of a kid for an apple that hangs on a branch of a tree. He can not grab the apple but he can touch it. So wicks give traders little confidence but they are not enough. But just like the little kid would grab the apple and pull it down is same to the candle close. The grabbnig moment of the hand to the apple is same as the closing price of candle. The kid is more confident to try to jump to higher apples. So is the market to try closing higher. Every new higher close than previous wick is most important for trend continuation.

So this was a long post for chart 1... I will continue explaining chart (day) 2 with next post.. coming soon.. first will have dinner..

Stay Green

Is it so unlikely to happen ?

M15 System - Explanation to Drawing Trendlines - Day 2

The following day since we are still runnning a long trade, new London Opening price sets the high of the day but we don't know that of course. So we keep our buy trade. And we also have no ascending trendline prepared yet. So we wait. and mark the highest candle close.

So I do again check 1: Candles are still above 60 LWMA so my bias is still bullish.

Check 2: Slope is not that steep. I notice that slope of green line doesn't want to follow the trend. That is first suspicion. But I still stick to the bull trend here.

Check 3: London Opening price is now far above while candle keep dropping. That keeps me alerted that trend is maybe losing steam or dying.

Check 4: I want to let my trade run but I see that all the inside candles now form an inner bullish trend so I stay with the trend hoping it will go up again.

 

1. First swing high is a higher close from previous inner swing high. All good here.
2. Next swing highs can't close above the line I marked as highest wick. So I feel like trend is really dying maybe. But I begin to draw my ascending trendlines.
3. First trendline and second trendline are useless as we discussed on earlier post so I draw the third line (it is the blue and I take it as the valid one. Once price breaks out to the downside I close my long trade.
4. The more time passes my bias has switched to bearish because I have not seen bull power even hours after London Opening.
5. 2, 3 and 4 numbered trendlines are still all good places to try a short on day 2.. These candles open below LO.. That gives me confidence.
6. This time to be able to buy high I get prepared to buy at breakout level of TL 3 or TL 4... doesn't matter much.. Once I do I notice that I went short while candles were above 60 LWMA.. You see? That is the weird feeling again. Inner voice will tell me no don't do it. But it is the only way to sell high.
7. Once I went short at 1.3625 or maybe at 1.3622 based on the example chart, I begin to watch price and candle openings. They still continue to open below breakout level. And we are also still below London Open (LO).. therefore all good.. we stay in the trade and then I also call it a day and leave trade open for next day.

This was day 2.. I hope it gives more clues why I use closing price of candles.. Next post will be Day 3 and it will complete these series.. coming soon..

Stay Green

there is a chance that it will happen.
but there is no guarantee.

M15 System - Explanation to Drawing Trendlines - Day 3

The last example is where we have now entered a short the day before and SL hunters come to bite us. But we keep our trade running.

Check 1: Candles are now below 60 LWMA and we feel a little confident about the trade.

Check 2: Slope is not that steep yet so that part doesn't give us additional confidence. Is well though.

Check 3: As soon as London opens price tries to bite us one more time and then goes back lower quickly and creates a new lower close (LC) and little later another lower close. We are now very confident.

 

1. While we have 2 LC candles we don't need to draw trendlines as I mentioned earlier. So first two trendlines will be ignored. But then price comes back for another shark attack. Even goes above the green LWMA line and scares us. Does it??? No not at all. Our stops would be still at the safe SL area I stated as gray text on chart and we would just wait to see a higher close but that never happens.
2. Then price starts dropping again and very quicker compared to before. Since we have a very flat BLUE trendline we can assume a reset is necessary and start from scratch to draw descending trendlines.
3. With every new Lower Close (LC) we don't do anything except letting shorts run. and Trailing SL..
4. On chart below I still have created the red and orange trendlines just to show that they mean nothing. We ignore them.
5. But the blue or green or purple or black Trendlines have been drawn because I had not seen any Lower Close anymore. Because inside that day's Asian session vola was so low that I decided to keep my short trade.
6. SL would be put above the Gray text level that marks the previous swing high. Or maybe one before that and I would just go to sleep after setting a real SL at those previous LC breakout levels.

On the next day (Day 4), Just before London Opening and even before Frankfurt Opening the 60 LWMA line was touched. It was also same level as the tiny breakouts during Asian session and it means we could add one more sell to our previous short right at this price level.

The rest of the day would be watching if we have more and more lower closings. That way we would trail SL until we get stopped out.

So.. this is my thinking process while trading and while drawing the M15 trendlines. No magic here and no rocket science. As you can see I simplified as much as I can. The longer you try to trade this way the better you will understand it.

I hope it answers some of the questions that were directed at me. If new questions arise feel free to ask..

Wishing you all a happy weekend..

Stay Green

I'm lost with all this ....1.3625 on my platform Eur/USD it's at 1.1722..am I missing something here?

Please read his posts carefully . He is giving examples from previous price data .

that price 1.3625 comes from the year 2015

it's just an example from a trading day of about 3 years ago

Moty!
no it's not unlikely, price closed at Supply and that's a Short on any other day.
Unfortunatly it was a Friday close. We need to wait for Monday and, I don't like Mondays... nobody does.

So here is the situation:
- if you took the trade: congratulations, you just made yet another terrible trade. It does not matter if the trade wins or loses. It is terrible because you took the entry on late Friday before close. It does not get any worse, seriously. (again, the outcome of a trade does not matter!)
- If you did not take the trade but suffer from your itchy finger syndrom even though it is saturday evening: place a pending Sellstop order.
- If you did not take the trade and you did not place a Sellstop order, shut down your trading platform and enjoy your weekend.
- If you can't enjoy your weekend and you finaly decided to get some real trading education and cut out all the bullshit, fire up Youtube and look up Sam Seiden and Sam Evans, watch all their videos (all of them!). Then read and watch Marc Douglas (everything!) and Walter Peters...
When you have done this, come back here and start asking the right questions (you will get the right answers)
Good night Moty

Nice Ata, thank you. So, from a high / low point, don't draw trend lines until the rules of "lower lowes (if down trend)" or "higher highes (if up trend)" is broken.
If a trend line is broken and switch positions from short to long or long to short, do you only do so at the close of a candle, or immediately if the price crosses the TL?

Thanks a lot for the time and effort invested in this social project,stay blessed ATA

lol..got it..thanks. I suppose I should read things out a bit further.

Hi Moty, your trading style will get a big welcome from pivot trading community. Go there and show your chart. I am pretty sure that they will agree on your thought. Cheers.

Thanks Ata for this nice and comprehensive explanation.
I have read it, and will read again and try to put it on the market.
Questions will rise, but first try a few times.
Have a nive weekend!

All Zones are open (valid for entry signals and profit targets) at time of posting.....

As previously stated, if you trade the EUR/USD, there are two ways to enter the market:

(1) After a Long/Short signal in the EUR/USD itself.

or

(2) After a Long/Short signal in a (highly inversely) correlated market, like the USDX.

Taking a look at the EUR/USD Weekly.

We're in no man's land. By that I mean, price is not in a Supply/Demand Delta Zone nor a Supply/Demand Delta Zone, so no trades can be taken. And so we can ask, "Which Zone will be hit first, and will that Zone hold or fold? And do we have a way to take advantage of either or both?".




Looking at our Sister Market, the USDX, we get an interesting picture and a possible trade set-up in the making.

Price has touched the Supply/Demand Delta Zone. We only need 1 tic of the price interval, or price pattern, to touch the Zone for a signal to be considered "in the right place". It's always,What you want to see, Where you want to see it".

Last week's inverted dark (open>close) hammer line may be the start a valid short entry pattern. For some, it may be a valid short signal all by itself. If we get a valid signal in he USDX, it would be "What we want to see, Where we want to see it". This would allow us to take the opposite trade in the EUR/USD, despite the fact that it hasn't given a valid signal and is not in a Zone to give it.



Back to where we started.

(1) to take a trade in the EUR/USD, we need price to either fall into the Supply/Demand Delta Zone below and produce a valid Long signal, or rise into the Supply/Demand Delta Zone and produce a valid Short signal.

or

(2) We can take an opposite trade based on a valid signal in a highly inversely correlated "Sister" market; The USDX. Currently, the USDX has produced a Supply Swamping Demand (SSD) interval. Which is the "Start Point" to a Confirmation Entry (CE) signal.

So, right now it's DO NOTHING*. If the Short CE signal confirms, look to get Long in the EUR/USD.

* You can always trade the EUR/USD on smaller time frames.

HiddenGap just a correction if you allow the Eur/Usd is right in the zone it should be

Hi, first post here.
And i just like to add some points to HiddenGap great post.
Nothing to take serious for sure, but is what i read and i would like to share.
More notes you can find at picture bottom.

IMHO, we should consider that we still in a down wave, price can also continue it's way down if last 4 or 5 weeks have been just a retration.
On the other hand, price has been ranging over previous resistance lines that might have become support now.

Therefore i would buy or sell depending on the future price direction, and PA.

Long if breaks higher than 1.17904
Short if breaks lower than 1.15072

Green pips to all of you,
C heers

Thank you Ata, you should be charging us to take this class

*Day View*
After a double bottom that failled to break psycollogical level of 1.500, price created a demand zone.
High Volume is seen when price aproach this area.
Price broke up bearish trendline and now it's been used as support with 2 touches with reverse upthrust candles.
Price is doing higher highs and higher lows (not seen since 27th March till 21st June!).
However, price still closed bellow recent supply zone. And it has been ranging between 1.18509 and 1.15092.
PA "says" up it goes... but some resistance still ahead.
No one knows where price will go next, so my plan would be to buy the lows and sell the highs inside previous mentioned range, until it breaks.

Long if breaks up 1.17904 would be also and option, taking special attention at PA.
Definitive long if breaks up 1.18509.
Short if breaks down 1.15092

Cheers,

Yes I manually quit only when candle closes. In extreme cases where market can go crazy suddenly and then one candle closes 100 pips above our trendline would not hurt us at all because we would be already stopped out with 20 to 30 pips which is generally the initial SL on every trade we would put on M15.

Long story short, closings of candles is everything inside this system. Wicks/Shadows are only important when it is the lowest or highest wick of the day (or of the inner trend/inside bar) depending on trend direction.

One more thing: The highest candle wick in an uptrend scenario becomes a main target level that needs to be broken for trend continuation. But on my system, to break such wick level we MUST have a HIGHER CLOSE (HC) above it. Not a higher high!!! That is important.

For bearish scenario flip the story: Lowest wick of the day (or of the inner trend/inside bar) will be marked as a level that needs to be broken. Only a Lower Close (LC) can be taken serious. Any swing lows that go below lowest wick but then comes back and closes above it will be ignored (or better said: can be seen as sign of weakness). We need to focus to closing prices only in all sorts of breakouts.

I hope it clarifies.

Stay Green