Plotting Trendlines + Support Resistance

Hey guys, I am trying to get a real good feel for trendlines and plotting support resistance.

My problem lies within the fact that I do not know when to draw 'them'

Let me explain a bit.

I am wanting to learn how to trade trendline bounces/breakthroughs on the 15m (because I do not have enough 'risk capital' to do anything longer).
Say I notice a higher high and a higher low, I know I am in a uptrend. So draw a trendline from the wick of the higher low to the next higher low.

Lets say that the price swings down to the trendline again and breaks through and then it goes sideways for.... 20 candles. Is it in my best interest to leave that previous trendline on the chart as it might come back to that sometime down the road? or should I be looking to redraw another trendline?

Should I be looking at higher timeframes as well to get a better feel of what the market is doing? Say 1hr and plot trendlines there as well?

I know it seems kind of trivial what I am asking... and I think the problem is that it feels too easy to work.

Any help would be greatly appreciated!

dont do this first of all! a few candles isnt support or resistance and i'll show you why. first look at the first pic:

http://i203.photobucket.com/albums/a...ntomewok/1.jpg

i put a trendline on three candles with lower lows and lower highs. the way you would be plotting it, that's a downtrend with support on that line. this isnt true. dont draw it just on a few candles and here's why:

http://i203.photobucket.com/albums/a...ntomewok/2.jpg

that yellow arrow shows the same line. see? it had absolutely no impact on the market, however, if you look at the second line i put up there, it bounces off of it multiple times. thats the point. that it touched it and bounced then came back and did it again. that's support and resistance.

now abig thing you have to know is that S/R isn't just one specific price or line. thinking that price is going to bounce off of one specific point is just ridiculous. S/R are areas, not points. you will see highs/lows pushing outside the lines, sometimes even the actual candle bodies. check out this pic:

http://i203.photobucket.com/albums/a...ntomewok/3.jpg

look at the arrows. see how the price sometimes pushed outside the lines? that's because S/R lines are general areas not specific points. this same idea applies to all S/R whether it's trendlines, fibos, pivot points etc.

now here's some examples of horizontal S/R:

http://i203.photobucket.com/albums/a...ntomewok/4.jpg

http://i203.photobucket.com/albums/a...ntomewok/5.jpg


notice how the support and resistance are in general ares, not specific points again.

one big thing you are going to have to remember when you use technical analysis is that it's incredibly subjective. patterns can mean one thing to one person, and something else entirely to another.

the best way to know what to do around S/R or chart patterns is to watch and learn. the only way to know how a pair is going to break or bounce is to constantly watch pairs and see what they do around S/R.

if that trendline is broken and stays broken for quite a bit of time, it's done for now unless you see a good bounce off of it sometime later. don't trade on the first bounce after it's broken though, wait for another bounce.

when you use S/R and trendlines, there's a TON of waiting involved and it gets really tedious and boring. you're also going to miss aquite a bit of good trades, but the whole point is to wait for the right setup. if you have a bunch of good setups with consistent results, you're good to go.

yeah, but trendlines are going to be trendlines. S/R shouldn't change from TF to TF. it should remain the same becaus eprice is price lol. but yeah, if it helps you see it better, then go for it bro.

not at all bro. there is no shame in asking about something that you dont entirely understand. and it looks easy, and it sort of is, but it takes a lot of time to learn it and to be able to wait for the good setups. i'm still working on that lol.

i hoped that helped you a little bit dude. good luck trading!

Check out BillyRayValentine's "No Brainer Trades" thread, and his www.nobrainertrades.com web site.

dbfm.

HI.
I sometimes switch the candlestick charts to a line chart. if you're new then it clears up areas that aren't obviously s/r zones. The line chart will usually be on closed price , so won't show high or lows but is near enough. It can become clear where price has hit and you are just observing a single line. I like to do this on a 1hr chart to trade m5 charts. You do what you are comfy with. I plot the s and r hroizontal lines on the H1 line chart , then switch back to a candle chart. It soon becomes clear what you're looking for and I then trade around these levels. If you do the above on mt4 then the s/r lines remain as you drop timeframes.
As Blacksun1 points out, these are only areas and not to the pip.
For sloping trendlines i use rsi indi on bottom of chart to confirm a low. As BS1 showed the three candles weren't enough to draw a t/line. It is hard to know if a bottom has been put in. Try rsi14 and then backtest some charts. Hold your crosshair at the low on the price and see if it is a low on the rsi. Then look for the next low or high on both and that would be the place to try drawing the t/line to. This is a bit subjective but it may help to get a feel for the lows or highs to draw from and to.
Also notice how even a sloping t/line that was support can become res. Blacksun1s' chart on the right hand side shows this, so if you have drawn a line that works it is not yet finished with, leave it on.
Hope it helps.
Andy.

Thanks for the reply's. Blacksuns post really helped me out so far. Havent checked out the link yet but I am going to here shortly!

anyone ever hear of the LRC ? Stands for Linear Regression Channel and is essentially nothing more than a series of three trend lines, two of which refer to historic support (one line) and resistance (other line) and a midpoint line (3rd line)

it draws itself and is amazingly accurate and can be found as <SHI_Channel_True>

use it and your problems should be gone

enjoy and trade well

mp

Well I have heard of it because of your thread on Babypips, but I did not follow it because I thought that you could only use it on MT4??

while i dont know what platform youre using, it tends to be a pretty standard chart overlay, but if you cant use it on your platform for any reason, why not simply get a MT4 demo and use that as another form of charting assistance ?

in the attached jpeg, i apologize for the spaghetti roaming the face of the chart, but they dont bite and i find them rather helpful to me at least, although a microscope and magnifying glass does tend to help locate the candles, assuming one wants to see the candles (LOL)

the green lines are the SHI (just another name for LRC) Channel.

enjoy and trade well

mp

What do you use this channel for? In Dealbook360 there is no middle channel... it pretty much reminds me of Bollinger Bands in how they react???

there are a number of LRC's used, as a few really good people put their heads together and came up with their own breed, but the one with the middle channel (and my poor memory cant remember WHICH one this is) is the most important, simply because that middle line is a VERY important point while trading.

the difference between bollinger bands, which show tp points thru momentum of the moving averages (usually 20) and the LRC is that the LRC simply represents historical support and resistance, and shows the trend at this specific moment in time on the specific timeframe you choose.

additionally, we have utilized different values in a custom indicator that shows the MAIN trend and 2 of the minor trends. In general, one goes on the thought that once resistance is reached, the price will then bounce towards and reach the LOWER support area. This is an oversimplification, although essentially true, because the LRC will SHOW YOU WHERE YOUR PRICE IS and where its heading, if you have support and resistance on your charts. Unlike the bols, they remain steady in the upper timeframes UNLESS a new support or resistance point has been achieved to alter their prices !

Please note that fibs can enter into the discussion, but recently they have lost their FIRST PLACE in the land of forex due to the influx of so many retail and institutional traders from the land of equities, where traders have little to work with anymore (at least for the time being). Equities traders use support and resistance, and that overlay has taken over from the fibs, except in the case where both happen to be on the same line, which is rare.

What the LRC can show you is beyond mere words --- it has to be seen in action and understood, and then becomes a tool you will never be without.

this attached LRC shows THREE channels working ---- 2 are moving together in an upside move (white and yellow lines) which is a VERY strong trend indicator, while the small white one is heading down, suggesting strongly that we are heading towards the bottom of the channels, and that a short with its tp at the bottom band, would certainly not be a bad trade.

enjoy and trade well

mp

oh yeah, attached is the SHI_Channel_true overlay that creates one of those channels

Hey there, I have uploaded a picture of my chart which I trade from last night, and today.

It looks like a complete utter mess - Let me say, its a language! I may see things different with my own set of eyes, then what you see looking at it. Plotting support and resistance lines are definetly area's of simply SUPPORT AND RESISTANCE.. they bounce off , or possibly pierce through creating a support from a resistance, etc. (watch for whiplash)

I do breakout trading, I also selling high, and buy low... Look at the US Session on my chart, you will notice 4396 as a strong level of support, and a key BUY AREA.. set a STOP LOSS @ approximately 10-15 pips underneath and just left your trade progress.. with TP in and around your resistance level which is 4504.

Early in the EURO session, was a key buy area -bounce off the trendline so i bought, lucky for me it kept sky rocketing.. 4504 actually would have been a good place to "look" to buy.. since it pierced, retraced, again a few times.. quite tricky, since you may have wanted to short it.. but if you could put a BUY order 5-7 pips above the key area.

Scrolling back in bit in time, you can see the last HIGH was 4596 to be exact... it didn't actually get to that point.. but it had a decent rejection - and 4577 was a decent place to short on the beginning of that candle.. with a 15 pip SL outside resistance. Of cource, it went down all the way to 4396, back up to a previous old resistance of 4504 and the rest is history and easily readable.

So yeah, did i mention charting is a language! strong levels of support and resistance, knowing when not to play 'inbetween' the lines..

I strictly work off a 5 minute chart.. I guess the older timers argue thats no way to make money, its impossible! nothing but noise.. I can't complain. I probably made more pips working a good 12 hours straight+ then most. Oh yeah, in my underwear listening to music!

http://img15.imageshack.us/img15/3116/79829291.jpg

Time for retrace ?

Ill have to look at the chart when I get home tonight. I cant view pictures unless they are posted through the website, not a 3rd party.

87.06 is smiling like a cheshire cat, but we must expect a retrace after 85.96 before we aim for that mountain --- like a week, give or take a day or so !

enjoy and trade well

mp

Bouncing at 94