(binned per thread starter’s request) Abe's Median Line Thread

I'm now trading futures, mostly /MNQ (micro e-mini Nasdaq-100). Micro futures make it possible for those without large accounts to trade futures. I'm on the "thinkorswim" platform.

Market open

Some thoughts on trading median lines:

First a median line is a relationship between 3 points and completes once price reaches the median line or the center line created by the 3 point relationship. This completion is stated by Andrews in a different way: "Price reaches the median line about 80% of the time".

So the search for "C" is often part of a strategy to take advantage of this 80% probability of reaching the median line. The thought is that once "C" is in then one might trade toward the median line. This is entirely possible and I have in fact presented this as a strategy in this thread.

At it's most pure "C" is not confirmed until price reaches the median line (center line) or in other words the median line completes.

If price does not reach the median line and then falls below our hopeful "C" point then that median line did not complete and "C" was not "C".

In the chart below price does reach the median line and "C" is validated. But now what?

As stated above once price reaches the median line it is confirmed and we ask ourselves "what next".

Before we answer this question it's important to examine how price descended from B to C. The blue diagonal lines represent the two largest swings on the way down to "C". They are confirmed swings because each of these swings' highs were confirmed when price made a new low relative to the swing.

This is important because we can use these confirmed swings to help us decide when price direction might change. Notice when price breaks and closes above the lowest blue swing. (the 2 charts are the same, I just signified the swings differently to clarify). The bar that closes above is a WRB. Price then continues to the median line and "zooms" the median line with another WRB. So now what?

Moving on...
As price moved up to and "zoomed" the median line we can now refer to another of Andrew's rules. "When price zooms the median line it will retest". This is true but many assume that this means you can get long the retest with abandon. This is not true.

First we need to recognize that the "zoom" is in the form of a WRB gap as shown. We also need to recognize that there was another WRB gap below this as shown. The lower WRB gap is more significant since it is the area where price overcame the first confirmed blue swing. This is where buyers showed their strength. Also there is another important factor here.

Notice the WRB tail as shown. This WRB tail represents a serious attempt of sellers to take price back down. However, this WRB tail is taken out to the upside further confirming buyer strength.

So given this when price approached the first WRB gap origin it is prudent to see how price will react. It goes through and...

tests the lower WRB gap. Now what?

Without going into more minutia it is my opinion that the lower brown demand area is an excellent buy with a target at the upper median line.

Although I've marked up this chart alot I don't do this in real time especially when day-trading tick charts. I'm just trying to explain price action in the context of median lines.

The center, upper and lower lines of median lines are not magical. They are not trading signals. Rather it is the price action (bars or candles) around the lines that tell us when or when not to trade.

Frequency is BS

Without necessarily trying to trash other threads I do see attempts to outline PA with the lines showing so-called frequency and then suggesting that such frequency validates a "median line". Once "validated" then it can be traded. But they never say exactly how to do so. I reject this notion of frequency and suggest it has nothing to do with trading median lines but is rather more akin to "channel trading". Just about the time one is able to draw in a median line that shows awesome frequency is about the same time it stops respecting the lines. I don't see any threads that push this false methodology detailing how they actually trade them. They show beautiful median lines with fantastic frequency but never show where, how or when to pull the trigger. You'll hear them say "it's up to each individual to determine when to enter". Wow!!! Thanks!!!.

One trade today on ?MNQ 333 tick chart. I'll try to explain.
Two MLs shown. Both are the same but one is standard and the other a modified schiff.
"C" occurs and price marches toward the median line center line of the blue ML which is the same as the upper ML of the red ML.
Price reaches the upper yellow line then falls back and reaches the lower yellow line and begins marching up again. At this point if price had take out the upper median line then we would have an official higher low (the lower yellow line) but instead price falls below the lower median line.

At this point my thinking is hagopian and that price is likely to fall lower. The upper green arrow points to a "bullish tail". The next bar (lower green arrow) takes out this "bullish tail" so I placed a sell limit as shown and got filled. Target was the lower median line of the red ML but I bailed a little early.

This trade just highlights that the lines in and of themselves really have little to do with the actual trade and I think this is why many have difficulty trading with MLs because they are looking to the lines for trades. Rather it is the price action where the trades are.

Second trade was a "no fill".
Here price officially reached the center line validating C.
After reaching the center line price pulls back to the lower blue line then goes on to make a HH thus validating a LH. For me this signifies the likelihood that price is going to move higher.
The brown rectangles mark areas where buyers stepped in with force and are usually WRB gaps. I often look to these areas to enter trades (whether or not they are on the lines. LOL).
Price reached the second highest brown rectangle where I did not intend to enter on the first touch. I waited for another retest with a limit order but did not get filled. Price took off and reached the upper ML.

"KISS" Use your tools and don't let them use you. This applies to Median lines.

When learning how median lines can help one with their trading it is good to experiment alot. But this experimentation should occur in the context of what median lines are trying to accomplish. So it is also good to acquire some basic knowledge of what median lines are trying to do and experiment within such a framework rather than draw median lines willy-nilly.

As I've said before a median line is only describing a relationship between 3 price points. Assuming we are just using a standard median line then this relationship is rather straight forward but often over-complicated.

1. Once A and B forms then we can anticipate at some point that C will also form. C is not confirmed until price reaches the center line. we can anticipate that a potential C might lead to price reaching the center line. How price moves toward the center line may present opportunity.
2. Once price reaches the center line it can do 3 things. a) it can zoom it b)it can reject it c) it can range.
a. If it zooms then often evidence of support/resistance or supply/demand may be created around the center and this might be and area to consider trading.
b. If it is rejected then again evidence of support/resistance or supply/demand may occur providing a potential opportunity.
c. Ranging will eventually break and this break may create evidence of support/resistance or supply/demand providing a potential opportunity.

Finally we can use the upper and lower lines of the median line as projections of price once price seems to have decided to go one way or the other.

At some point the median line should be abandoned in favor of a new A, B and C. If one does not then the median line becomes a channel because the forces that created the initial A, B, C are no longer in control.

In the chart below the blue ML is describing price from a prominent swing. When price reaches the center line of the blue median line it essentially completes that ML and it becomes a matter of how we are going to interpret price action occurring at this area.

Note that price had been trending down. Once price reaches and goes through the center line it may represent a change in trend. It also may not. But I'm using the ML for this purpose in this case rather than letting the ML use me. Price finds support at the center line. I want to be clear here that the center line in and of itself did not stop price but rather the supply/demand dynamic occurring at this area. One's understanding of price action in this area should govern one's decision to trade or not.

I've put in another ML describing price trending up. Price reached and zoomed the center line. There is support just below and we'll see what happens. I'm not suggesting any trade.

Hey Abe,

Appreciating your hard work, planning on reading through your thread have only been over the first page now.

Trying to just apply ML sets and structure analysis in my chart, feel free to butcher it if you feel like it !

I used to trade like this before I transitioned to the AR method.

Cheers!

Hello dinnersticks. Thanks for dropping by. I'm kind of getting away from forex and concentrating on futures but I still have access to my Oanda platform so I'll take a stab at this and use it as an opportunity to emphasize my take on using median lines.

This pair has been trending down on this time frame. I've chosen the largest confirmed swing (a new low confirms a swing high) in this frame and drawn a median line using that swing. This means this is the swing I'm intending to trade and any trade I take will occur in the context of this swing.

The purple ML at this point has not completed although the potential "C" many would say seems well defined and trading towards the center line of this ML seems logical. Note the deep pullback where orange B is located. If price had managed to keep going at this point then "C" would have failed. Let's move on.

Orange B is a failed new low in the context of the purple ML. Price now moves up and takes out a previous high (orange A). This is significant and represents a potential intention of price to reverse the overall downtrend. It is also the reason I've drawn the orange ML as a modified schiff signifying the new potential direction.

The light blue rectangle represent significant bullish price action where I would be looking for potential buys. But I would not suggest limit buys at this point. Instead I personally would wait to see how price reacts at these areas.

I'll try to keep an eye on this pair and f/u and see how things work out.

You are welcome and thanks for replying and putting effort in my request.

You are extremely meticulous, truly objective in your approach, impressive !

I myself do not intently look out for these WRB's and PA areas as those you marked in the chart.

I overlooked your purple ML, in my own analysis I measure and project, to create a confluence
for a potential reversal zone. Your ML set did work out splendidly in this regard.
I do not believe the actual ML will be hit anymore based on the found geometry where the lines converge.
And if it does one who traded it could still escape at BE.

Because the ML did not get hit, lets say the ML set did complete based on the measured and projected geometry.
(Sorry shoving my analysis on your head) basing on the original Andrews rule that when a ML does not get hit
price will move more distance in the way it came from. Combining these 2 views should insert some bearish sentiment,
atleast it does for me !

Thanks again for your effort I appreciate it!

Cheers

Thanks dinnersticks. I want to clarify a bit because I think you've made some assumptions I either respectfully disagree with or perhaps misunderstand the statements.

First The purple ML is still in play and will be until price takes out unconfirmed purple C. C will be unconfirmed when and if price reaches the ML (center line) of the purple ML.

I'm not sure what you mean by "getting out at BE". I guess you feel a trade could have been taken at some point and perhaps you feel the current price action is a chance to get out at BE based on a that trade. But again I don't know what trade that would have been.

It seems you're assuming the purple ML might be failing and there is a possible hagopian. Fair enough but I would need to see more evidence that price really is moving down with some force. So far I don't see that.
As I have stated many times in this thread I don't give any particular significance to the lines themselves or confluences or frequency. I trade price action in the context of swings as outlined by MLs. That is why I concentrate on price action.

Oke good you clarified, I am an AR trader, my approach to the market is different from yours, which is why my rambling likely didn't make much sense to you.

The purple ML is indeed still in play agreed, your comment: C will be unconfirmed when and if price reaches the ML (center line) of the purple ML.
You meant confirmed correct?


I'm not sure what you mean by "getting out at BE". I guess you feel a trade could have been taken at some point and perhaps you feel the current price action is a chance to get out at BE based on a that trade. But again I don't know what trade that would have been.

A trade could have been taken yes based on my analysis, which I did try to explain. If I may quote myself:

I overlooked your purple ML, in my own analysis I measure and project, to create a confluence
for a potential reversal zone. Your ML set did work out splendidly in this regard.

When you take a look at my charts a confluence of lines can be spotted which created a potential reversal zone(pivot)
In my general analysis I mainly use MPL's, 0-4 and 0-3 lines to find these areas.

About frequency, I do not trade it(barely) I trade reaction lines, measured and projected geometry.

It is clear you are closer to a PA trader than a TL trader, where as I am the opposite which is why I tried adjusting my initial chart
to the theme of your thread. But I gues my personality got the better of me.

In the chart below I added the CL which shows this is not trading frequency but action reaction, the latter is extremely more powerful to trade.

Have a good one Abe!

Thought I'd follow through with this and see where price goes.

I've adjusted the ML a bit and deleted the larger purple ML. (I'm never married to any ML and if I see something that is better I won't hesitate to change things up). In fact I often erase everything and start over.

So here we have standard and modified schiff MLs drawn from the same ABC pivots. Current PA supports price marching upwards with LHs and HHs. The blue modified schiff ML describes this price action nicely. The orange standard ML is drawn in just to show the possibility that price may run out of steam and begin selling off. But this is just a possibility and current PA does not really support this. Selling into buyers is usually not recommended.

It's not difficult to see where the buyers are sitting and the blue rectangles depict this. Selling into this area requires a lot of faith. When you see 2 discrete areas of buying as shown here you can often bet that the first level of buyers will get washed. The lower set of buyers often will defend their positions absorbing SLs taken out above. Also buying the the lower set gives a much better SL under structure. The red line is the SL.

I didn't get to trade today but there was some great price action on /MNQ. I'll comment later.

MNQ 333 tick chart. Pre market open. I don't trade until Wallstreet opens.

EURUSD H1 FX - no live trade but an interesting chart.

The major blue ML represents the major swing I've chosen in this frame.
The minor orange ML is used here to gauge smaller swings from the blue swing low.

The minor orange ML is just a standard ML. Price was rejected when it reached the orange ML center line. It fell into a bullish WRB (being pointed at). If one wants to trade towards the major median line (center line) this is one way to do it. This is a "bump - gift" trade.

One has to be careful with this kind of trade and make sure there is evidence of buyers. The WRB in this case represents buyers.

This is a 3 minute GBPUSD FX chart. Similar to previous post. I'll let the chart speak for itself unless someone has questions or wants explanation.

Gonna give a go of recording some live trading in the near future. But before I do I wanted to do some practice. So here's a video explaining how I use median lines to trade the /MNQ. It's 25 minutes long so I hope it's not too boring.

https://www.youtube.com/watch?v=1WcbhT6z7IA