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Drawing the Trendline "By The Books" Or "By Experience"?

  • #21
  • May 3, 2016 2:31am May 3, 2016 2:31am
Quoting Shabs19
First, the horizontal trend called the "sideways trend" No such thing as a sideways trend. Do you mean a ranging market, consolidation ? Secondly, in the books are given, often perfect examples. For example, the book will not take the trend, which has a breakdown because of the news. Therefore, by reading the book, you need to trade. No sequence. Books will always show perfect examples, it also depends on whether you draw them consistently, as the rules vary from author to author. Breakdowns of trendlines occur as professionals will target stops...
1.
Yes. Consolidation, sideways trend, horizontal movement, movement between levels - this is what I meant. Here is a book:
The Little Book of Sideways Markets: How to Make Money in Markets that Go Nowhere Hardcover - December 7, 2010
by Vitaliy N. Katsenelson (Author)

2. Agree with you.

3. I meant that I think faithful picture 2 and 3. I'm sorry, that just did not elaborate. The movement in the hallway, horizontal - is consolidation. Therefore it is impossible to allocate correction in consolidation. Thus, every change in prices in a sideways trend can be called a correction.
  • #22
  • May 3, 2016 3:03am May 3, 2016 3:03am
Quoting Shabs19
{quote} Are you talking about Renko charts, point & figure charts etc. where there is no time axis ?
Apologies - seems like I wasn’t subscribed to this thread for some reason

No I’m not talking about Renko/Point and Figure charts. I’m only talking about standard time-based, candle charts.

I agree that S+R/S+D levels etc are key - well they are for me at least. Trendlines can be very useful but at the end of the day I think it’s important to keep them in perspective. In my view they are a time-based derivation of broken and retested S+R/S+D levels. These levels are just a price, or a price-range, and can therefore only be represented in drawing form in a single axis. In other words - just a straight line, i.e. the bid/ask line(s).

The moment we add the time element to the study of broken and retested price we add a 2nd dimension to our charts thus giving us the ability to render broken and retested S+R/S+D levels over time, which of course comes out looking like arcs and sloping lines; in other words “trendlines”. So I agree that trendlines are not horizontal lines, but I think it’s important in any study of trendlines (let’s call them “standard” trendlines) to remember that trendlines and horizontal (S+R/S+D basically) lines are connected. IMHO making this connection helps traders to draw better trendlines, which evidently feeds into the OP’s original question, by the book, or by experience?
  • #23
  • May 3, 2016 3:33am May 3, 2016 3:33am
A statistical viewpoint of defining trends (price action directional bias and excursion to/from the mean) using standard deviation channels

Attached Image (click to enlarge)
Click to Enlarge Name: Statistical definition of trend.JPG Size: 168 KB


Primary trend is the statistical definition of price action on the highest timeframe available (eg. MN). Secondary trend is the next level order of fractal zigzag that defines the scope of the primary trend. Tertiary trend is the next level of fractal zigzag that defines the scope of the secondary trend....and so on a so forth. The extension/compression of the zigzag provides information regarding overall trend momentum.
  • #24
  • May 3, 2016 3:39am May 3, 2016 3:39am
Quoting Copernicus
A statistical viewpoint of defining trends (price action directional bias and excursion to/from the mean) using standard deviation channels {image} Primary trend is the statistical definition of price action on the highest timeframe available (eg. MN). Secondary trend is the next level order of fractal zigzag that defines the scope of the primary trend. Tertiary trend is the next level of fractal zigzag that defines the scope of the secondary trend....and so on a so forth. The extension/compression of the zigzag provides information regarding overall...
Interesting. A good and obvious example.
  • #25
  • May 3, 2016 3:49am May 3, 2016 3:49am
Quoting DenForex
{quote} Interesting. A good and obvious example.
I was looking at your chart interpretation Den and we actually get similar results regarding primary and secondary movements despite different underlying methods (Elliott Wave versus Fractal Interpretation). :-)
  • #26
  • May 3, 2016 5:04am May 3, 2016 5:04am
Quoting chartsndream
Looking at the first chart, where would you draw the trendline? Would it look something like the trendline drawn in the second chart? That is how the books you read about technical analysis teach you and how majority of traders are plotting their charts. But why is it then that 95% of traders really lose money? Is it really psychology fully at fault or does it also have to do with the way we are taught to trade in the first place? Take a look the third picture, this is how the trendline is drawn by a trader with a decade of market experience. This...

Chartsdream,

Following my insights based on my experience:

Drawing trendlines on a chart is supposed to achieve 2 specific goals:
1. Confirmation whether a trend is still running in direction of a current trade (long = up-line; short = down-line)
2. Find an exit for a running trade or find entries for a new trade (price penetrating the line)

Based on my 2 points, your example in the 3rd picture shows the logical and necessary trend line:
Assume, you are in a long-trade starting around 23. March and you are looking for getting the most out of a trend. Around 7. April price reaches the potential supply-zone or resistance and could reverse and go down. Drawing the up-line under the lows shows you a clear exit point for the trade - when price goes down through the line then the trend is over and you exit the long-trade. Also you could open a new trade and go short. The line as drawn on 3rd picture gives enough leeway for potential up/down-price-noise around the supply-zone to prevent early stop-out.

In my experience a robust trend is present when:
- in an uptrend price makes higher lows
- in a downtrend price makes lower highs

I place uptrend-lines under the lows and downtrend-lines above the highs.
In either direction - price going through the line is the trigger point for exit/entry.

My target is:
- in an uptrend I look for exit from long-position or for new entry to go short
- in a downtrend I look for exit from short-position or for new entry to go long

-.-
Getrich Fast
  • #27
  • May 3, 2016 5:05am May 3, 2016 5:05am
Quoting Copernicus
{quote} I was looking at your chart interpretation Den and we actually get similar results regarding primary and secondary movements despite different underlying methods (Elliott Wave versus Fractal Interpretation). :-)
The point we passed the same. Therefore, I was so interested in your version :-) I believe that the same results - a good sign.
Good luck to you!
  • #28
  • Last Post: May 3, 2016 5:33am May 3, 2016 5:33am
Quoting Getrich Fast
{quote} Chartsdream, Following my insights based on my experience: Drawing trendlines on a chart is supposed to achieve 2 specific goals: 1. Confirmation whether a trend is still running in direction of a current trade (long = up-line; short = down-line) 2. Find an exit for a running trade or find entries for a new trade (price penetrating the line) Based on my 2 points, your example in the 3rd picture shows the logical and necessary trend line: Assume, you are in a long-trade starting around 23. March and you are looking for getting the most out...
very well said! That is exactly the mindset that I feel traders need when it comes to trendlines based on the learning I have been doing most recent.
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