Follow the trend!

I will second this. Following the trend makes everything much easier.
Pipp

I thought caviar came from sturgeon..... You use salmon eggs to catch trout with.

Just wanted to say that I had several trades go well today (well, some still in process), and it's because I used basic S/R, trends, triangles/pennants/etc, and I'm up 90 pips for the day on 3 trades. I'm actually learning something, woohoo!! :-) Trend is my friend.

bravo

Why are the wicks better for drawing trendlines than the closing price? I'm sure Pring says (in Technical Analysis Explained) that traders using daily charts prefer the closing price as it's a more significant indicatior of the psychological direction of market participants (or something like that).

As a newbie I'm really enjoying this thread and finding the expertise of seasoned traders a great help. I've been learning about and trying out lots of different ideas on trading for the past couple of years and have come back to where it all began - the trend. At the moment I'm using closing prices on hourly, 4 hour and daily charts to draw my trend lines and I'm using the wicks to indicate good places to set stops. I suppose if I used wicks to draw the trend lines I could potentially get in earlier and set tighter stops?

Have I just answered my own question? Opinions on wicks versus closing prices for trend lines (and why) would be much appreciated.

Craig

Nothing really particular. But I've been using the wicks and it works for me. And I noticed there isn't much difference between using the wicks or closing price because most of the time the price will bounce off the trendline before it actually touched the trendline. Trendline is just for estimation.

You can trade with trendlines only. I like to use Fib levels to get an idea where there might be a pullback for a good entry and also to scalp in and out of a position within a trend channel. Enough people watch Fib levels to make them a self-fulfilling prophecy. I don't believe Fib levels to be magic but many traders do, and that's what makes them work.
I'm not a fan of any other indicators. Trendlines are the most powerful tool you have. Using Fib levels help determine where retracements are likely.
I trade successfully with just those two things. I'm not sharp enough to learn all the other indicators, though they sure do look impressive on the screen and they're fun to play with.
That's not to say many of the strategies posted on this forum and based on indicators won't work. Only saying that if you hate indicators you can still do well with simplicity.
Often I see the brokers websites posting strategies with entries and exits based on intense analysis. A glance at their chart reveals that using the simple 1-2-3 strategy posted here on FF will give you practically the same figure.
Don't make this harder than it already is.


To a once fluid man, cramped and distorted by the classical mess.

ive been trading really successfully lately and all I have been using is price. Thats it.. pure price.. I look at where support and resistance is and if it breaks resistance and support seems to be holding I buy, trail my stops, and call it a day..

like what was said earlier, dont make this harder than it is

Hi,

to keep this thread alive maybe we could focus on TL drawing? Maybe that's an overkill but as I go deeper with thinking how to draw them I draw fewer of them, more precise and giving better signals for a great ride!

Right now I'm convinced that parallel lines work great. As on the picture below there is a down channel on Cable which should last for some time yet (till weekly up line is meet). The thing is that after having main downtrend line (second from the top) I've found very soon the middle of the channel, readjusted the bottom as time passed just to enter quick longs nearly to the pip! The channel is symmetrical, it just happened! The top line was plotted simply parallel from the first top and price touched it exactly to the pip with the second brake up from the channel.

Also as I can see the angles of up/down channels are quite the same when you look daily/weekly. Also there was the idea that the top line was 0.382 away as to the channel width. Maybe there is something in it?

Another idea to limit valid trendlines is that each smaller trend (for example daily up to weekly up) must be steeper. Each line going more flat may result in reversal. So one can say where is the end of trend - vertical, reversal to another trendline just to point where monthly trend gets nearly vertical. Looks simple.

These are my ideas for now concerning just TL and PA trading. Yes it is as simple as that. Maybe I'm trying to reinvent the wheel right now but each day it's getting more simple by making it more complicated!

I like this thread and hope it continues.
Following the trend involves going with the major trend and buying peaks and valleys of the minor trends.
In the end we are still looking for trend reversals but we are trying to determine them on the minor trends instead of the major trend.
Jimmy Young wrote a great tutorial on how one could do this using the 1 hr. 15 min and 5 min charts.
I thought it might be of interest to those who may not have seen it yet.
I couldn`t find the link so I will post it here.

How to Read a Chart & Act Effectively, by Jimmy Young
--------------------------------------------------------------------------------
Introduction
This is a guide that tells you, in simple understandable language, how to choose the right charts, read them correctly, and act effectively in the market from what you see on them. Probably most of you have taken a course or studied the use of charts in the past. This should add to that knowledge.

Recommendation
There are several good charting packages available free. Netdania is what I use.

Using charts effectively
The default number of periods on these charts is 300. This is a good starting point;


Hourly chart that’s about 12 days of data.
15 minute chart its 3 days of data.
5-minute chart it’s slightly more than 24 hours of data.
You can create multiple "tabs" or "layouts" so that it’s easy to quickly switch between charts or sets of charts.

What to look at first
1. Glance at hourly chart to see the big picture. Note significant support and resistance levels within 2% of today’s opening rate.
2. Study the 15 minute chart in great detail noting the following:


Prevailing trend
Current price in relation to the 60 period simple moving average.
High and low since GMT 00:00
Tops and bottoms during full 3 day time period.
How to use the information gathered so far
1. Determine the big picture (for intraday trading).
Glancing at the hourly chart will give you the big picture – up or down. If it’s not clear immediately then you’re in a trading range. Lets assume the trend is down.
2. Determine if the 15 minute chart confirms the downtrend indicated by big picture:
Current price on 15-minute chart should be below 60 period moving average and the moving average line should be sloping down. If this is so then you have established the direction of the prevailing trend to be down.
There are always two trends – a prevailing (major) trend and a minor trend. The minor trend is a reversal of the main trend, which lasts for a short period of time. Minor trends are clearly spotted on 5-minute charts.
3. Determine the current trend (major or minor) from the 5 minute chart:
Current price on 5-minute chart is below 60 period moving average and the moving average line is sloping downward – major trend.
Current price on 5-minute chart is above 60 period moving average and the moving average line is sloping upward – minor trend.

How to trade the information gathered so far
At this point you know the following:

Direction of the prevailing trend.
Whether we are currently trading in the direction of the prevailing (major) trend or experiencing a minor trend (reaction to major trend).
Possible trade scenarios:
1) Lets assume prevailing (major) trend is down and we are in a minor up-trend. Strategy would be to sell when the current price on 5-minute chart falls below the 60 period moving average and the 60 period moving average line is sloping downward. Why? Because the prevailing trend is reasserting itself and the next move is likely to be down. Is there more we can do? Yes. Look for further confirmation. For example, if the minor trend had stalled for a while and the lows of the past half hour or hour are very close to the 5 minute moving average then selling just below the lows of the past half hour is a better place to enter the market then just below the moving average line.
2) Lets assume prevailing (major) trend is down and 5-minute chart confirms downtrend. Strategy would be to wait for a minor (up trend) trend to appear and reverse before entering the market. The reason for this is that the move is too “mature” at this point and a correction is likely. Since you trade with tight stops you will be stopped out on a reaction. Exception: If market trades through today’s low and/ or low of past three days (these levels will be apparent on the 15 minute chart) further quick downward price action is likely and a short position would be correct.
3) A better strategy assuming prevailing trend down, 5-minute chart down, and just above days lows is to BUY with a tight stop below the day’s low. Your risk is limited and defined and the technical condition (overdone?) is in your favor. Confirmation would be if today’s low was a bit higher than yesterday’s low and the price action indicated a very short-term trading range (1 minute chart) just above today’s low. The thinking here is that buyers are not waiting for a break of today’s or yesterday’s low to buy cheaper; they are concerned they may not see the level.
4) Generally speaking, the safest place to buy is after a sustained significant decline when the bottoms are getting higher. Preferably these bottoms will be hours apart. By the third or forth higher bottom it is clear a bottom is in place and an up-move is coming. As in the example above your risk is limited and defined – a low lower than the last low.
5) The reverse is true in major up-trends.

Other chart ideas


There are always two trends to consider – a major trend and a minor trend. The minor trend is a reversal of the major trend, which generally lasts for a short period of time.
Buying above old tops and selling below old bottoms can be excellent entry levels; assuming the move is not overly mature and a nearby reaction unlikely.
When a strong up move is occurring the market should make both higher tops and higher bottoms. The reverse is true for down moves- lower bottoms and lower tops.
Reactions (minor reversals) are smaller when a strong move is occurring. As the reactions begin to increase that is a clear warning signal that the move is losing momentum. When the last reaction exceeds the prior reaction you can assume the trend has changed, at least temporarily.
Higher bottoms always indicate strength, and an up move usually starts from the third or fourth higher bottom. Reverse this rule in a rising market; lower tops…
You will always make the most money by following the major trend although to say you will never trade against the trend means that you will miss a lot of opportunities to make big profits. The rule is: When you are trading against the trend wait until you have a definite indication of a selling or buying point near the top or bottom, where you can place a close stop loss order (risk small amount of capital). The profit target can be a short-term gain to nearby resistance or more.
Consider the normal or average daily range, average price change from open to high and average price change from open to low, in determining your intra-day price targets.
Do not overlook the fact that it requires time for a market to get ready at the bottom before it advances and for selling pressure to work it’s way through at top before a decline. Smaller loses and sideways trading are a sign the trend may be waning in a downtrend. Smaller gains and sideways trading in an up trend.
Fourth time at bottom or top is crucial; next phase of move will soon become clear… be ready.
Oftentimes, when an important support or resistance level is broken a quick move occurs followed by a reaction back to or slightly above support or below resistance. This is a great opportunity to play the break on the “rebound”. Your stop can be super tight. For example, EURUSD important resistance 1.0840 is broken and a quick move to 1.0860, followed by a decline to 1.0835. Buy with a 1.0820 stop. The move back down is natural and takes nothing away from the importance of the breakout. However, EURUSD should not decline significantly below the breakout (breakout 1.0840; EURUSD should not go below 1.0825.
After a prolonged up move when a top has been made there is usually a trading range, followed by a sharp decline. After that, a secondary reaction back near the old highs often occurs. This is because the market gets ahead of itself and a short squeeze occurs. Selling near the old top with a stop above the old top is the safest place to sell.
The third lower top is also a great place to sell.
The same is true in reverse for down moves.
Be careful not to buy near top or sell near bottom within trading ranges. Wait for breakaway (huge profit potential) or play the range.
Whether the market is very active or in a trading range, all indications are more accurate and trustworthier when the market is actively trading.
Limitations of charts
Scheduled economic announcements that are complete surprises render nearby short-term support and resistance levels meaningless because the basis (all available information) has changed significantly, requiring a price adjustment to reflect the new information. Other support and resistance levels within the normal daily trading range remain valid. For example, on Friday the unemployment number missed the mark by roughly 120,000 jobs. That’s a huge disparity and rendered all nearby resistance levels in the EURUSD meaningless. However, resistance level 200 points or more from the day’s opening were still meaningful because they represented resistance to a big up move on a given day.
Unscheduled or unexpected statements by government officials may render all charts points on a short-term chart meaningless, depending upon the severity of what was said or implied. For example, when Treasury Secretary John Snow hinted that the U.S. had abandoned its strong U.S. dollar policy.

Randomlight,

What you have posted here is very well defined with the use of elliott waves. I say this as I have recently added back to my trading rules the use of channels and elliott waves. I have a strategy that uses a zig zag indicator and stoch on the 1,5,15 min charts. The signals from this are traded with regard of the 1 hr channels and elliott wave count.

Attached you will see a 1hr chart of gbpjpy that has the channels and you can see how often these TL's are hit from previously determined high's and low's. These points are seen as fractals or where elliott wave counts are seen.

1 hr gbpusd shows a little more messy channels but still you can see the TL's pulled off parallel to the channels and how the are hit and often provide excellant S&R.

Traden

I have to be honest traden4x. After 2 years of this I have pretty much given up on all indicators except the use of 1 moving average.
I don`t even use pivots or fibs much at all.
I only use previous resistance and support lines and trendlines that I pick out .
I watch the previous days high and lows very carfully.
I have also learned that it is much easier to predict minor trend changes than major trend changes so I always go with the trend.
I do not believe that previous formations or lagging indicators in any way shed light on possible future events.
I hope I don`t come off as a know it all here, I am only talking about my own experience.

Random,

Here is a shot of gbpusd for today and the channel line that was bounced to the near pip and then price moving to last weeks high and respecting it. Violation of this level would invalidate the current elliott wave count.

EURUSD shows similar bounce off of channel lines. These channel lines have been in place sometimes for weeks as price moves up and down in wave counts.

GBPJPY 4hr chart shows price coming into the larger radding picture as price has moved out of the smaller waves. Trying new size for gbpjpy. Try this link and see how the image is. http://img481.imageshack.us/img481/1...r352307ve0.gif

Traden

Post bigger attachments or change in MT4 output to 600xsomething (600x600 is attachment limit as far as I remember). Can't see anything

Does anyone else have this problem? I can see the attachments. It may be that the forum reduces the size. Looking at the setting from the forum, it will take a JPEG of 700x1000. I have just done the screen capture from a 22". I use a product similar to SnagIt. If someone has a solution to fix this please let me know. All that I'm trying is being truncated by the forum. I may goto image shack for the hosting or posting to another forum if I continue with this.

Linking to the server solves this problem, but I've read somewhere that forum accepts up to 600x600 attachments. My chart few post back is 500x300.

BTW Trend lines are just lovely, today +140 pips ride on Cable, slight correction (i'm short) and tomorrow heavy uptrend?

It should be an up day tomorrow, or shortly. It looks like this is the end of a corrective wave and the start of an impulse wave. I need to do more analysis but this may be Wave 3 of the 1st wave up of the Impulsive wave.

I also take note of the Open/Close of a candle as DeMark suggets (sounds like Pring and DeMark might be on the same page here?), while still following the High/Low.

: ) Thom

Yup! I got so burned out trading the London session while living on the West Coast of the USA that i had to find another way to trade. That has led me to the longer term charts, particularly the daily though i'm also watching the 4 hour.

: ) Thom

yes much easier to trade the daily

i will particularly recc trading the 4hr with the weekly as an intermediete trend indicator. Gives very good entries on 4hr retracements.