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Why do trendlines work?

  • #21
  • Jun 12, 2014 6:09pm Jun 12, 2014 6:09pm
Logically, the trendline connects price interest points in the market, be it a horizontal line or a sloping trendline.
The more it is respected, the more interest there will be in the future for that line.

Critically a trendline break will often mark the end of a trend or the start of a new one.
IMHO, It is a great market sentiment tool if used correctly.

Only way to learn is by asking the right questions.
It never gets easier, you just get better
  • #22
  • Jul 5, 2014 7:07am Jul 5, 2014 7:07am
IMO trendlines work because the big boys watch trendlines and take them seriously. Buying at a trendline is buying low in a trend. Small risk for a potentially high rewarding trade.

False breaks are everywhere but you will see this at any kind of support and resistance. In my view the best trades opportunities take place when several kinds of support/resistance line up(fibs, trendlines, historical support/resistance). But frankly, I'm still not good enough in identifying s&r but I am convinced this is the way to trade.
  • #23
  • Jul 23, 2014 11:00pm Jul 23, 2014 11:00pm
Quote
Why do trendlines work?

They don't
"There's a sucker born every minute" - P.T. Barnum
  • #24
  • Oct 15, 2018 11:21pm Oct 15, 2018 11:21pm
I don't know why trendlines work but they are a wonderful tool. Gann mentioned something about the first leg of a move can tell you where price may (he may have said will) go.

I put this question in the same category as the Planetary lines. However if the planets affect us and therefore our trading decisions then there is an answer for the planets. Maybe Trendlines have something to do with planets??
  • #25
  • Oct 19, 2018 10:30am Oct 19, 2018 10:30am
Quoting zykas
{quote} Trading is basiclly a supply and demand interaction.
Exactly, this is why line, horizontal support trend/resistant levers are important! I think, these kind of technical tools are more important than the trading indicators.
  • #26
  • Oct 20, 2018 1:46am Oct 20, 2018 1:46am
Quoting GeorgeBaile
{quote} Exactly, this is why line, horizontal support trend/resistant levers are important! I think, these kind of technical tools are more important than the trading indicators.
Neither.

You can choose any way to measure market as you wish. A technical indicator, trend line, s/p zone, candle high/low. It all works till it does not.

What really matters is how you react when course of action expected by you does not unfold in expected fashion anymore.

And that leads to sayings such as: cut your losses fast, don't fight the market ect - folks wisdom to a problem indicated above.
  • #27
  • Oct 20, 2018 7:32am Oct 20, 2018 7:32am
i dont think there is trend line.

use a trade panel EA and backtest the history,draw your trend line then try to trade.you will find out :it's impossible to predict the future.
  • #28
  • Oct 21, 2018 1:45pm Oct 21, 2018 1:45pm
No, not only trend lines work. You must have some more clue if price going to be exhausted like candle formation, pinbar, engulfing bar, and another thing. Or if not, you have a breakout from a trend line
  • #29
  • Oct 23, 2018 10:09am Oct 23, 2018 10:09am
Quoting vaflis
Firstly, you have to help yourself, asking here wont help you, try to concentrate what happens next rather than asking why...? there are plenty of threads started and just few are worth of reading, try to find them.... peace rookie boy
All of trend lines are not valid; it depends on the market levels! But no doubt, if we can pick up the valid points then we can identify the market trend by this technical tool so smartly.
  • #30
  • Oct 28, 2018 7:04pm Oct 28, 2018 7:04pm
Quoting Toppi
No, not only trend lines work. You must have some more clue if price going to be exhausted like candle formation, pinbar, engulfing bar, and another thing. Or if not, you have a breakout from a trend line
Mate, I suppose you are a candle pattern based trader; isn’t? Do you use support/resistant levels on your chart?
  • #31
  • Oct 29, 2018 9:29am Oct 29, 2018 9:29am
Quoting DarrenLehma
{quote} All of trend lines are not valid; it depends on the market levels! But no doubt, if we can pick up the valid points then we can identify the market trend by this technical tool so smartly.
The longer the time frame, the more trustworthy the trend line, in my opinion.
  • #32
  • Nov 24, 2018 1:39pm Nov 24, 2018 1:39pm
I think its safe to say that trendlines work for a variety of reasons. I disagree that they work mainly because people have used them and its become a self fulfilling prophecy of sorts. If there was no efficacy to them to begin with no one would have started using them to create the self fulfilling prophecy /cycle to begin with.

The adaptation of them by the masses reinforce their inherent efficacy.

Trend lines work and worked initially because they are geometric divisions of geometric structures. Most of us see that markets do indeed respond to Fibonacci, Lucas levels etc. Gann's various tools and squares also demonstrate this point. So market movements are not random.

For example if one were to create a square starting at a price point. (As per the definition of a square all sides being equal) and draw 45 degree lines bisecting the square in two one would see that in more cases then not prices react to the 45 degree lines.

Trend lines are on the diagonal and therefore address both price and time. The issue of course is to pick correct starting points and figure out which trendline is the most dominant. When using any trendline technique confluence from other indicators is essential.!
  • #33
  • Nov 24, 2018 3:45pm Nov 24, 2018 3:45pm
Quoting pambeesley
Am interested in the reasoning behind why trendlines work? For example, why is it that SOMETIMES, prices will still respect a trendline drawn and extended many days before? Thanks
I'd suggest it is a combination of perhaps three main factors:
1) The natural tendency for the human brain to want to see patterns, and a trendline is just a kind of pattern
2) Because trendlines indicate, well, trends! And trends tend to persist until that buy/sell imbalance is changed
3) If traders see 1) & 2) you can get self fulfilling reinforcement as orders will tend to be massed at the trendline(s).

The big 'SOMETIMES' in your question is very relevant. All trading is inherently probabilistic and there is no indicator, trendlines included, that are so reliable. It just gives you an insight into where you might be able to find a trade that has a better than 50% chance of success and/or where the risk-reward of a trade can be tilted in your favour - your edge.
  • #34
  • Nov 27, 2018 12:11am Nov 27, 2018 12:11am
Quoting Oldtraderman
{quote} I'd suggest it is a combination of perhaps three main factors: 1) The natural tendency for the human brain to want to see patterns, and a trendline is just a kind of pattern 2) Because trendlines indicate, well, trends! And trends tend to persist until that buy/sell imbalance is changed 3) If traders see 1) & 2) you can get self fulfilling reinforcement as orders will tend to be massed at the trendline(s). The big 'SOMETIMES' in your question is very relevant. All trading is inherently probabilistic and there is no indicator, trendlines...
Thanks for your long details. Basically, trend line works on mainly range based market; during impulsive market or tiny corrective it doesn’t work.
  • #35
  • Nov 28, 2018 8:27pm Nov 28, 2018 8:27pm
Mainly, it identifies direction of trend. They give us the an angle to an trend, giving us an idea of how strong or weak a trend is.
  • #36
  • Nov 29, 2018 7:22am Nov 29, 2018 7:22am
Quoting Butterscotch
Mainly, it identifies direction of trend. They give us the an angle to an trend, giving us an idea of how strong or weak a trend is.
Yes, & sometimes it works as like support and resistant level; then we can set our TP & SL based of trend line.
  • #37
  • Nov 29, 2018 8:42am Nov 29, 2018 8:42am
I like the find confluences in both trend lines and S&R levels.
  • #38
  • Nov 29, 2018 9:29am Nov 29, 2018 9:29am
Do trendlines work?
Necessity knows no law except to conquer
  • #39
  • Nov 30, 2018 4:59am Nov 30, 2018 4:59am
Quoting Forexkongs
I like the find confluences in both trend lines and S&R levels.
Perfect; same here! That’s my favorite combo! Even; sometimes I use fibo.
  • #40
  • Dec 6, 2018 5:19am Dec 6, 2018 5:19am
Quoting ZikriIrfan
{quote} Perfect; same here! That’s my favorite combo! Even; sometimes I use fibo.
Sounds like we are on the same page
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