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trend lines help

  • #1
  • First Post: Jul 28, 2007 3:01pm Jul 28, 2007 3:01pm
hope u guys doing well

am gonna start posting charts with trend lines, let me know if am getting them right(i know there isnt right and wrong but i just wanna make sure i got the concept of trend lines)

so am gonna start with EUR/USD
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  • #2
  • Jul 28, 2007 7:24pm Jul 28, 2007 7:24pm
USD/JPY
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  • #3
  • Jul 28, 2007 7:34pm Jul 28, 2007 7:34pm
NZD/USD
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  • #4
  • Jul 28, 2007 7:37pm Jul 28, 2007 7:37pm
AUD/USD
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  • #5
  • Jul 28, 2007 7:41pm Jul 28, 2007 7:41pm
USD/CAD
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  • #6
  • Jul 28, 2007 10:50pm Jul 28, 2007 10:50pm
I think this is a great subject to bring up, I would like to hear what James and the other experienced traders have to say on this subject and to hear how they deal with it. I am aware that there are two different schools of thought on this subject - the first being the Tom DeMark objective method (TD Supply & Demand lines), and others such as Guppy who think this is flawed and rely more on generic trendlines to capture the majority of price action. I can see the logic in both arguments, thats the problem. For instance, heres Guppy:

"The purpose of a trendline is to define future trend and to help decide which price action is significant or insignificant in terms of trend change. This step causes most confusion and it highlights the difference in the way we use a trendline. If we believe the line has a predictive role then we are frequently frustrated as future price action invalidates our plot. Price closes below the trendline, we take an exit, then prices recover and the trend continues upwards.

An extention of this approach is the preoccupation with deciding how to set the correct plot for the trendline using as little information as possible. There is a tendency to believe if there is a single correct trendline solution and if it is found early enough, it is possible to plot an accurate predictive trendline. This belief sends traders on a fruitless search for an algorithm or a set of precise rules to plot the definitive trendline." (NOTE: He's talking about Tom DeMark)

However here's Tom DeMark:

"Although trendlines are universally used, it is surprising how dissimilar they are in construction and interpretation, and how subjectively they are applied. Not only is it commonplace for different analysts to draw different trendlines, but the same individual on seperate occasions will draw two totally different trendlines on identical information, depending on his inclination each time. Not all trendlines can be correct, only one is.... This bothered me greatly, I was determined to avoid any further confusion and misunderstanding..."

Based on my own frustration with TD lines and seeing these false breakouts, I am tending more these days to plot generic trendlines that capture or describe the approximate trend. Guppys argument is that a swingpoint can be a freak price occurance or false breakout in the overall trend, so your line might be plotted from one false breakout to another false breakout and be incorrect.

Also I think that it is a bit of a lunatic tendency to try to objectify price action - trading is shades of grey. Just as a James16 PPZ describes an approximate zone of price action, just so these days Im thinking the same applies to trendlines.

However I would like to hear what others have to say on this, especially our more experienced traders.
  • #7
  • Jul 28, 2007 10:59pm Jul 28, 2007 10:59pm
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See here how the TD dynamic lines from swingpoint to swingpoint never accurately describe the trend.
  • #8
  • Jul 30, 2007 2:53am Jul 30, 2007 2:53am
Quoting simonwildcat
Attachment

See here how the TD dynamic lines from swingpoint to swingpoint never accurately describe the trend.
1. some people draw trendlines using HI/LO of bars, others prefer close on a line graph.

2. different brokers have different hi/lo, close so there is no single "accurate" trendline.

3. i see (almost constant) differences (current bid/ask price) between ECN group and InterbankFX - 2-3 pips. so if you draw longer term trendilines these initially small differences in angles between trendlines are greatly increased over time in pips.

The solution is (at least mine) to wait for a close of a candle after breakout and entry after that (immediately or at retracement which almost always occurs) . I have also seen using guppy moving averages to filter out whipsaws, technique is based on the fact that false breakouts (stop hunting) have their own characteristics - most of the time these are sudden spikes on lower volatility easy to see with some experience (longer than usually candles on lower timeframes).
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  • #9
  • Jul 30, 2007 3:05am Jul 30, 2007 3:05am
Quoting 2.minutes
hope u guys doing well

am gonna start posting charts with trend lines, let me know if am getting them right(i know there isnt right and wrong but i just wanna make sure i got the concept of trend lines)

so am gonna start with EUR/USD
You got it

You nailed some good trades here (graph in initial post), pins as well as third bounces, SL on last extremum plus 1 plus spread, this is a classical PA system, I believe one of the oldest, used long before indicators.

You can also try trading the bias - use trendlines intraday trading ONLY in the direction of the main trend, ie when you see 3 bounce up on a daily chart enter only long intraday. This is one method of increasing probability of win.

The same applies to M1 and D1 or W1 and H4, or W1, H4 and M5 (look for a trend within a trend within a trend - all three in the same direction). The twist here - enter on lower timeframe (TTT method) and wait for a signal of exit on longer (after reaching some pips or at least breakevwn), sometimes it works wery well allowing a long smooth (sometimes ) ride.
Quidquid latine dictum sit altum viditur
  • #10
  • Jul 30, 2007 4:53am Jul 30, 2007 4:53am
Quoting dottore
You got it

You nailed some good trades here (graph in initial post), pins as well as third bounces, SL on last extremum plus 1 plus spread, this is a classical PA system, I believe one of the oldest, used long before indicators.

You can also try trading the bias - use trendlines intraday trading ONLY in the direction of the main trend, ie when you see 3 bounce up on a daily chart enter only long intraday. This is one method of increasing probability of win.

The same applies to M1 and D1 or W1 and H4, or W1, H4 and M5 (look for a trend within a trend within a trend - all three in the same direction). The twist here - enter on lower timeframe (TTT method) and wait for a signal of exit on longer (after reaching some pips or at least breakevwn), sometimes it works wery well allowing a long smooth (sometimes ) ride.
thanx guys for the help,

dottore can you please post a pic on the 3 bounce up, coz am not getting the idea.

regards
  • #11
  • Jul 30, 2007 5:21am Jul 30, 2007 5:21am
Quoting 2.minutes
thanx guys for the help,

dottore can you please post a pic on the 3 bounce up, coz am not getting the idea.

regards
We have trend when we join two points - buy a third bounce or breakout of this line, SL at last extremum plus 1 pips plus spread, TP rigid (small, 10, 15, 20 pips) or according to other S/R or trendlines.
Attached File(s)
File Type: zip 3 bounce system.zip   25 KB | 882 downloads
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  • #12
  • Jul 30, 2007 5:30am Jul 30, 2007 5:30am
Quoting dottore
We have trend when we join two points - buy a third bounce or breakout of this line, SL at last extremum plus 1 pips plus spread, TP rigid (small, 10, 15, 20 pips) or according to other S/R or trendlines.
hmm interesting, time to do some home work

thanx for the help
  • #13
  • Aug 1, 2007 5:49pm Aug 1, 2007 5:49pm
hey guys, would this be considered as inverted head and shoulders?
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  • #14
  • Aug 2, 2007 4:07am Aug 2, 2007 4:07am
Quoting 2.minutes
hey guys, would this be considered as inverted head and shoulders?
in my humble opinion yes, but lets wait and see how the situation will unfold.

i see some possible trades here:

1. close above red short term trendline (example - 0,5 lot) - TP on last maximum, price may eventually bounce back - possibility of second entry or even better entry - (example - 1 lot, this would be a high probability trade) .

2. as above but wait for a breach, retracement and bounce up - TP on black trendline - we have here 3660-3670 strong almost 2 years resistance area - now strong support (I believe), this will be a high probability trade.

3. after close over black trend above - long with TP on last maximum.

4. when price bounces back from black - high prob trade, TP on 62 fibo.

5. when price breaches 3610 area (last significant minimum) - short with TP on 50% fibo, when bounces back long, bot this would be not so good trade with small potential, at least for me.
Attached File(s)
File Type: zip 11.zip   21 KB | 772 downloads
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  • #15
  • Last Post: Aug 2, 2007 7:18am Aug 2, 2007 7:18am
thanx alot dottore
very helpfull
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