Trendlines through spikes?

I was confused about something, when drawing trendlines, do you draw them through spikes that occur during a fundamental announcement? Is the spike a true reflection of the market or just an anomaly because of the fundamental announcement and therefore I can draw trendlines through them?

thanks

It's best to draw your trend lines through congestion areas and leave out the extreme spikes.

Most traders draw through the spikes.

In addition to my post, spikes can show importance in price and should be analyzed carefully but they are not always relative to the overall market direction. Unless your a counter trend trader and then the spikes are what you are looking for.

wow ok thanks guys. with regards to a counter trend trader, are these traders that trade after a spike has formed due to a fundamental announcement?

thanks.

Here is a link that gives a broad explanation.

http://www.investopedia.com/terms/c/countertrend.asp

I personally would not recommend it, it yields smaller profits and it's risky. Counter-trend trading is like driving down the highway backwards, unless your a pro, your gonna get screwed! It's safer and easier to just go with the flow of the trend.

hey hidethereal, how do you trade with the trend. I think that my entries are getting better, however, if there is a trend already going on, I don't have good skill picking entries. How do you trade?

thanks.

The safest way to trade with the trend is to look for price to touch the trend line and then enter on the next candle/bar that closes higher than the previous. This will give you a safe entry point and allow you to place your stop loss not far below the trend line. For more risk you can enter on the candle that touches the trend line, it's up to you to determine what your risk threshold is.

what if the market isnt near the trendline for example, do you have any strategies on when to enter? Do you use candle stick formations?

I personally do not enter into a trending market unless there is a trend line bounce. I only go for the safe trades with the highest probability of succeeding.

Remember, there is always another opportunity. Sometimes you just have to wait...

what about trendline breaks? do you trade those?

I do if there is divergence and/or price action confirmation. I usually enter on the retest of the previous trend line unless there is strong divergence, then I will enter when the MACD ticks down or there is a strong break.