Trendline Points Clarification

Exactly. Mouteki system if used alongwith other indicator like SMA 9 and 18 for confirmation will be fruitful. Definetely it ill take time, if one uses 3 hour or 4 hour chart, but the results are positive.

In general would you say that better thrend lines are drawn on the 4hr timeframe?

Yes. But in case of choppy market conditions , it is better to go down to 1hr, 30 mins or 15 mins. If you had observed the cable 1 day chart you can that for fifteen days( two weeks in a month the GBP goes up and for another 15 days it goes down) and for another 15 days or so the market remains choppy.

But when one selcts the smaller time frame of 1 hr/ 30 mins/ 15 mins, it is better to be before the computer constantly to take the appropraite step. In case of longer time frams , one can have the chance to relax and be off the screen for some time.

When drawing your trendlines, is there any defined distance between the 2 points? If not, what is an ideal number of bars(4hr chart) that one should let pass before connecting ths lines (for a strong signal)? 12 bars, 16, 20?

Thanks

Please note Nikim that this guidance is purely relating to using trendlines in accordance with Tom DeMark (Mouteki) methodology.

The principle behind this is that you are looking for the most recent price action, therefore the latest support/resistance points. By all means be aware of long-term trends, but to focus on the potential break of the most recent price pattern you need to draw your lines as follows:

This applies to an uptrend.

(1) You draw your lines from RIGHT to LEFT (not left to right as is normally suggested)
(2) You look for a bar/candle nearest to the current active bar/candle that has 2 completed bars to the left of it and 2 completed bars to the right of it that have LOWER HIGHS than the bar you have selected. When you have found a qualifying bar/candle you treat that as Point 1.
(3) Looking to the LEFT you look for the next nearest bar/candle that also follows the rule laid out in (2). When you have found a qualifying bar/candle you treat that as Point 2. Please note: This candle's High must be HIGHER than the high of Point 1.
(4) Draw your trendline from Point 1 to Point 2

For a downtrend, apart from Rule (1) simply reverse the rules listed above, ie you look for bars/candles with HIGHER LOWS. Remember TLs must run from RIGHT to LEFT.

There is no ideal number of bars between the points but there can never be less than 4

Greetings, i agree with Scott and Peter's take on the TLs drawn and wanted to add this tid bit from Tom DeMark's book:

On page 48 he begins a section he calls "Revolutionary Breakthrough: "Validation of Intraday Price Breakouts". He goes into stating, (i'm summarizing) that a validation of a TL break will include a "Closing price on the bar immedeately before the breakout to the upside was a down close verses the previous days close."

From his examples you can see that there is first the correct TDTL drawn...then he waits... once there is a break of the TDTL AND the previous candle to the break closed in the opposite direction of the break he feels the TDTL break has now been validated.

If i've somehow buggered up what i've read somebody please correct me...I've been up all night trading and i't 9am pacific and i'm hittin' the hay.

: ) Thom

Hello,

I've got 2 questions:

1. Tom DeMark's book - where can I find it? Is there any pdf file, so I can download it?

2. Please, look at the attached picture: if 2 or 3 candles in a row have the same high (low) - can I draw a trendline through them?

Thx!

3trader

From what I understand from my two weeks of using this system, yes you can and should draw the trend line when you got more than one point as the high/low. The one thing you need to be sure of is that you have 2 candles on both sides that are not higher/lower then your trendline point.

As far as a PDF on DeMarks book I'd Love to find a copy too.

Can you post and/pm me which momentum indicator you use? TD in his book says to use a momentum indicator plus an ema cross to perfect the setup... I believe the ema settings are 30 and 9...can anyone confirm?

Hey Jetheat,

Breakout of trendlines can be a powerful trading strategy, I hope it goes well for you. If you continue to trade this tho, you may want to have a look at the book "Encyclopedia of chart patterns" over 1000 pages of various patterns and how to trade them, stats etc. Some patterns have proven themselves to be winners more times than not. My copy is on its way(gotta love amazon).

I trade a different strategy than trend patterns but always keep an eye out for them as they can be another confirming signal to make a stronger case to buy or sell.

GCTrader