Behind Trendlines

Just a quicky.
Whichever timeframe you use to draw your trendline - there will always be a certain degree of noise - and this does not help in the drawing of our trendlines.

If we move to the next higher timeframe you can pick out the relevant points much more easily, to draw your trendlines on (then refer those points back to your normal trading timeframe)

I trade stocks and with my software, if I draw a line on a chart in one timeframe it will also be reflected on any other timeframe which I may choose (I suppose this is also available with your Forex software?)

Hope the above is helpfull, I get many great ideas from FF, which I use for my equities. Thank you

Peter

Interesting thread.

I am not sure why this is a difficult to understand. Everybody contributes to the MOVE in the market;the retail traders, the institutional traders, the hedge funds, the banks, the Central Banks, etc.

The market is simply a set of beliefs, and trendline is again a belief. IIt is the belief that price has to reverse when it touches this line, that causes traders to place their sell and buy orders (in billions), which when triggered, react to the line.

Let me tell you something. No matter what system or strategy you have, no matter what type of traders you are (fundamental or technical), it is not your system or the economic news that move the market. It is the beliefs of the people who watch the systems and the news that move it....

An NFP news one particular month maybe excellent for the USD, but traders may not have confidence on the USd, and this may result in USD gooing down and not up as expected.

My 2 cents.

Lots of great posts in this thread!

As for trading exclusively on trend lines, try look at multiple time frames; this helps eliminate the noise from trend lines and helps you see more accurately the stronger trend lines to base your trades on. While trend lines on your smaller time frame will make you money, they can also eat up you if you don't understand what's going on across multiple time frames.

Trend lines are never absolute. All trend lines will fail eventually, so they can be traded when price bounces off of them or when they break-- failed trendlines are one of my personal favorite types of trades.

Also, since trend lines represent supply and demand, try thinking of them as angled "areas" of support and resistance rather than single points along a thin line holding up your price. That should eliminate some of the noise around them as well.

Hi Neverallin,
Why not transfer the higher timeframe pivot values used to draw your trendline, to the timeframe you trade from? Gets rid of those insignificant "tails"

Failed trendlines
I'm sure you do this, but it may be of interest to others:
Maybe worth checking if the trend has actually changed before taking your new trade i.e. Use Dow Theory - a trend cannot change unless the prevailing pivot hi/lo sequence has changed

Here's something that may be of use to you?
If you want to locate a pair that has progressed enough to be able to draw a trendline - then its easy enough if you use say the Stochastic (5,3,3).

I know indicators are frowned upon by many - but they do have their uses

For long trades (opp for shorts), Scan your pairs for stoch buy signals.
(Stoch is quite good at picking out reversals, which means pivot points).
Then connect the current swing low to the previous swing low
If this trendline slopes up - you may have a tradeable trendline
If it slopes down - then you probably have bullish divergence - also tradeable

Have a good day

Care to expand on this?

You can certainly transfer trend lines between timeframes; I frequently use higher timeframe trend lines on my entry timeframe and vice versa-- helps in seeing the trend line as an area rather than as an absolute line composed of rigid single points. As for your pivot values; just keep in mind that your trend line on the entry time frame chart may not line up exactly with the trend line on the higher time frame chart because your "tails" and pivot values may be different across time frames-- again, see the trend line as an area.

Failed trend lines by themselves aren't necessarily an indication of a trade. I never use any single piece of information exclusively to get into a trade. If that failed trend line happens to be also at a daily or weekly support area, or breaking out of a chart pattern, or I have other reason to also look at a potential market reversal, then I'll enter on the break. If not, I may wait for a more conservative entry such as a 123 reversal taking out the swing pivot to confirm a new direction.

As far as stochastics, macds, etc, I've studied them, used them before, but I don't particularly care for them. Why watch an indicator that tells me what price just did when I can watch what price is doing now? When you can read divergence within price action, you have no use for divergence indicators.

Hi neverallin,
"When you can read divergence within price action, you have no use for divergence indicators"

Fair comment. I admire your expertise, maybe one day I'll be able to do the same?

This application may not be applicable to Forex
I trade stocks, and find it very helpful - I can scan a universe of thousands of stocks for divergence, in a couple of mins. Indicators are great for scans, we can then analyse the results for price/volume action to decide our best opportunities

Promise this will be my last post, do not want to confuse any Forex trader with stock tactics, I was just trying to be helpful

Hi candlepips,
Trend change:
For an uptrend we have a repeating sequence of higher pivot highs followed by higher pivot lows - so long as this sequence continues, an uptrend is still in place
If this sequence changes to lower pivot highs followed by lower pivot lows sequence, then we have a downtrend
Any other combination - range trading

Regards

Hi
Is there any correlation between GBP/USD and EUR/USD pair?
most of the times both will move in the same direction few times it wont and
also whats the corelation between USD and dow jones index?
I heard they will invesrley becaz investors sell safe asset dollar inorder to invest in risky asset in stocks
Is it be true