Advanced discussion about trend lines

Hi guys,

I've opened this thread in order to find experienced people who have studied on trend lines and use them as their analysis of the market. I've been in this market since 2006 and spent a lot on studying lots of tools, indicators, etc. I don't want to talk about my background or how much I know about market or TA, instead, I intend to zero in on one very precious tool that most traders don't know well and take it for granted. I've searched a lot during these years everywhere from forex websites to youtube for advanced and constructive knowledge about trend lines and to be honest there is none. All you can find are some rudimentary views on this valuable concept. In every video or any article about trend lines, people don't even have any idea of how to draw a trend line or what a correct trend line looks like. The only thing that you find is that a trend line is drawn by connecting 2 or 3 or more dots from wherever you want. Some people relate it to Fibonacci, others use an irrelevant or unnecessary indicator to find some highs or lows, etc.

Anyway, I know some untold insights into drawing and using trend lines in different situations but still, I'm looking for more. I'm not going to play guru or brag about what I know or try to lure newbies into this thread. Just the opposite, I'm looking for very experienced people who have studied a lot on trend lines and have new things to say so that we can share our experience and improve. To be honest, I haven't held my breath and I have a glimmer of hope to find such people here on FF but still let's shoot in the dark.

I already have a profitable strategy using trend lines so if you think trend lines are just connecting dots and useless please move on and find another place to share your knowledge, no offense.

If you think your experience fits the above criteria and you are willing to disclose it, please answer the following questions either at the first of your post or during your explanation.

How do you draw a trend line and why?

What types of trend lines do you know and what is the use of each of them?

Do you use multi-timeframe for analysis or just analyze in one timeframe?

Do you think terminals like MT4 have bugs or somehow defective for drawing trend lines? If so, is it general or it happens on specific occasions?

These are just a few general questions but I think they can open the discussion well but you can elaborate if you will.

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Here is a video where I explained How I draw TLs:

Well as you can see there aren't any people who have worked on this so called easy concept and yet people always complain here that no one can make money in this market. To be honest I thought that it went something like that but I expected a little more from the largest forex community but no problem. Since I'm not the kind of person who gives up easily, I decided to change the first idea of this thread and start posting by myself. Maybe there are still people out there who shies away and don't want to engage easily so I keep on and we'll see if there are any.

Most of the things that you'll see may seem new to you and you haven't seen them anywhere else because they are private studies that I've worked on and developed during years. There are some insights that I have reasons for them and others that work well but I don't have any explanation about. The latter is the reason that I want to share them. There might be the people who have the same experience or know better understanding about them. If there are any, I can learn more. If there aren't any, everyone who visits this thread can get a better grasp of trend lines.

All the ideas that are going to share in this thread are based on pure TA and believed to have a mathematical order. It means they can apply to all timeframes and can't fade away during years. There are some solid rules like the way we draw the lines. we don't change them at all and after a few time, everyone can draw them correctly but there are situations that need more experience to find them like some patterns or understanding the right situation and consequently the specific type of trend line that must be drawn in that situation.

When we get to analysis parts, we have to do that in a multi timeframe way otherwise it doesn't work although you might find your own method according to basic concepts of this thread.

Just one more thing, all the things that I'm going to say is about the linear trend lines not the curve ones. Although I know some new ideas about MAs and I've worked on them for quite a bit I've found the linear trend lines more useful and profitable.

I'll start posting the basics in the closest time that I find and try to continue this thread as far as I can.

Fisrt you have to find the last 2 lower highs or higher lows which unbroken. Then I draw my trend line on line chart. Its important, because by this way you avoid a lot of fake breakouts. Lower than Daily TF, trend lines give a lot of false signals. Therefore its better to start from Monthly and stop on H4, but never open a trade based on H4, your trend navigation must be higher ones. H4 is the where you should find best price for sell (if trend down) and for buy (if UP). I think this is the simple way drawing trend lines.
DRAWBACKS: Sometimes breakouts are just second higher low or lower high. Sometimes price comes back to test that trend after breakout, but suddenly join to its previous direction. It happens often in overbought/oversold markets. Hope I helped somehow.

Hello everyone...

Well I'm not an expert on the subject, but in general, I have some objective rules to follow to draw trend lines and operate breaks

1. identify the trend over a longer period. (For example h4)

2. Identify the maximum and minimum in a time frame lower than the one you identified the trend. (Objectively for example with the aid of a zigzag or other method)

3. I do not know why, but it works best for me, to draw trend lines with maximum and minimum of at least two consecutive days, never draw a trend line with the maximum and minimum of the same day.

4. If the trend line is broken in a specific place, such as an offer or demand zone or a TAZ (trader action zone), it gives me more confidence.

For example....

DeMark has some pretty advanced material on using trend-lines. I use Andrew's Pitchfork or Median Lines as my primary trading tool which has some commonality with trendl-ines.

Thank you guys. I really appreciate that you've shared your experience but with all due respect I have to say that the way you draw trend lines are not, let's say, precise enough. That's the thing that most people, maybe 90% or even more, don't pay attention to. Let's start with a short real story where I came across a thread a long time ago. The beginner of the thread claimed that he could predict all the movements of the market according to some points that he called them "touch points". That's ridiculous, I know but there was a worthwhile method that he used to draw trend lines. He drew them very precise in a way that the lines must include all the possible wicks and closes/opens of the candles but it must not cross any bodies. At first I thought it couldn't change a lot if we miss one or two candles or for instance if the line penetrates into a candle a little bit but he insisted that if you do any of them your trend line is not correct at all and hell yeah he was right. I figured that out a few years later. I bet you won't believe that how important that is but if you are persistent enough you'll see and it'll change all the things that you've known about trend lines so far. As a matter of fact, this method is according to the math definition of trend lines. A trend line should be drawn in a way that includes all the possible points. Of course if the reason that you draw a trend line is just to find out the direction of a trend, you don't need to be precise. You don't even need to draw a line; you can see price bias just by your eyes, but if you're looking for other things such as entry points, correct supports and resistances, calculating the correct SL etc, you'll get into trouble if you don't draw your line correctly.

By the time, it took me a few weeks to draw the lines in most situations correctly but still it takes a lot more to get it right in all situations, so spend as much time as you need to do it correctly.

Of course drawing trend lines is the only thing that I've borrowed from that thread and all the other things that I'm going to write in this thread are due to my personal studies.

This thread won't be good for people who are looking for an easy method that makes them rich fast, which we all know there aren't any. You have to spend time and be very precise and hardworking although you've saved a lot of time as I've done many of studies that you need. But still if anyone has the same experience, more or less, I'd be more than happy to listen to. I can promise that if you can pull off other aspects of trading such as money management, psychology and discipline, this thread can do the job of technical analysis for you and take you to the place in this business where you always wanted.

You now know how to draw a TL in theory but I'll give you some examples in the next post. This step (drawing correct lines) is the most crucial step, so don't go over other posts if you haven't become master at it.

Just one more thing, drawing trend lines correctly can't make a huge difference per se but it will help a lot and make a gigantic difference when we get to other steps of this thread. However, you can use this kind of drawing in your analysis and you'll be confident that you draw correct TLs.

These are some examples of drawing correct trend lines. I've explained in the pictures why the trend lines are correct or incorrect.

I have to say one more time that the exactitude of choosing candles is the main factor in drawing a correct trend line and consequently it affects the final results. Sometimes just missing a candle or crossing a body can make a huge difference in the result and can change the outcome and give us wrong variables for entering or exiting or setting a correct SL.

I'll post more pictures later to make this clearer.

correct

incorrect

correct

incorrect

Well, these two days I'm on staycation and have more time to do some activities so I made a poll. Please participate in it so that I can figure out how many of visitors are familiar with this type of drawing.

The following example is a resistance line but the same rules are applied here too. Of course there are some other things like the size of a wave or in other words the number of candles that should be considered when we draw a trend line. Most of the time, the number of candles should be less than this picture so you have to go to lower timeframes. In general you need to go through timeframes to find the correct one but our priority is the timeframes with fewer candles than this example. In this particular example this timeframe is suitable for drawing the line. I'll explain these things in detail later but for now we are going to home in on drawing a correct line.

I've included those candles explained in the first picture and you can see the result in the square that has changed. Although in this particular example the results may not be huge and we can still make profit, in some other situations it's not like this and we might suffer losses.

Thanks for this thread.
I have spent a lot of time on trendlines. I couldn't make them as profitable as they seem.
But I never thought drawing them like you do. I think I will reconsider them thanks to you.

So, do you trade only rebounces like you suggested in your last post or breakouts as well ?

Thank you for your comment my friend and I'm glad that you've found this thread useful.

Regarding to your question I have to say that I haven't talked about my strategy yet. There are several setups in my strategy and some situations that must be met so that I can enter a position. In one setup, which is one of the best ones, I enter the position after breaking a trend line but not immediately, but before we get to that point there are other principles that need to be told otherwise you'll get confused in various movements of the market. I don't want to rush it because believe me I've been there and it won't work that way. In some situations drawing a correct line is not easy at first. If you want to learn this method correctly you'd better spend a lot of time in each step. For example for the first step which is drawing correct lines, you should spend hours and hours or to be honest a few weeks trying to draw correct lines in various conditions of the market and see the reaction of the market to your line (price action). Of course, don't expect that you see very good reactions to every trend line you draw because there are some situations that you either haven't drawn them from the right points (we don't always draw TLs by connecting lows in bullish and highs in bearish) or your trend lines are under the impact of higher timeframes trend lines etc. so please take your time and practice drawing as many trend lines as you can so that you won't have problems in the future subjects.

Sorry guys for delay. I hope I can find more time for this thread.

So far we've addressed the method we need to draw our lines. In this post we're going to talk about timeframes. First of all, as I said before, in this strategy we should analyze the market in multi timeframe fashion because there are situations that we've followed all the rules in a timeframe but we realize that something is wrong and when we go to a higher timeframe we can understand why. Besides, there are situations where we need to go through different timeframes to find the right line.

We have some general rules for finding the correct timeframe but we need to be flexible and when we can't find the right line through our general rules we have to bend the rules a little bit to get to our goal. I'll explain it in this post more but before that let's set our general rules first.

For finding the right time frame, we start from the timeframe where a wave is just formed. It means our first choice is the timeframe with a formed wave that has the fewest candles. Before that timeframe we can't see an obvious wave and there are just a few consecutive candles. After that timeframe there are several waves with too many candles. To clear that up, look at the following pictures.

EXAMPLE 1

Attached Image (click to enlarge)

Attached Image (click to enlarge)

Attached Image (click to enlarge)

EXAMPLE2

As I said, these are our general rules that we use most of the time but there is other time when we change the rule a little according to price action. Sometimes we can rely on just 2 candles for drawing our line. If you can't find the right line for example you try every candle but something goes wrong, a crossing body or not including all the possible candles etc, you need to shift the time frame. You'll find the right timeframe after practicing but keep in mind that you always need to start with the timeframe that has both fewer candles and an obvious formed wave and if it doesn't work then try other timeframes.

I forgot to say something else. You can use MT5 that gives you more timeframes and can help sometimes but interestingly most of the time the main timeframes in MT4 are enough and more timeframes in MT5 don't make any fundamental changes. But all in all if you shift timeframes in MT4 and still you can't find the right timeframe, which is rare, you can try other timeframes in MT5 as well.

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P.S The next post will be about drawing trend lines in different situations of the market which is a pivotal point of this thread, so don't lose that.

Now that we know how to draw lines and what priorities we have in choosing timeframes, we are going to talk about the types of lines that we should draw in various types of waves.

In this method we draw the lines based on the volatility and slopes of the waves. It's obvious that the price doesnt move at the same speed and slopes. It moves in various angles based on the volume of the orders. The bigger orders the faster moves, and vice versa. Sometimes the price starts jumping with a steep slope and then it slows down. According to these movements and the slopes of trends, lines change too. Sometimes the lines become sharper and then it might get gentle. We need to update our trend lines according to the slope of waves otherwise we can't recognize the right trend line and consequently we lose the right entry point or enter in wrong positions.

In general, we have two main so called impulse waves and two main corrective waves in a single trend. (Impulse wave is the wave in the direction of a trend and corrections or corrective waves are against the trend.) We need to choose the type of our trend lines based on the comparison of impulse waves in terms of their slopes. If the slope of first impulse wave is either sharper or as the same as the second impulse wave, we use the old fashion method for drawing a trend line. It means we connect highs (in a bearish trend) and lows (in a bullish trend) and don't forget to draw trend lines precisely as it's mentioned in this thread. For recognizing the slope of the waves you don't need to be so precise. An approximate measurement by your eyes will suffice. Although there are some ways for measuring the difference of slops the fastest way is measuring by your eyes and you'll sometimes need to analyze fast, so try to use this method.

Look at the following pictures for clarification:

As you know market is sometimes so complicated. Most of the time there are big trends with several smaller waves or trends inside it. We need to check each trend individually although there are situations that one of our trend lines last for several following waves. On the other hand, there are situations where we need to draw several trend lines in a long main trend. So far we've just talked about one of the types of trend line. In the next posts we'll study other types and then we'll have a clearer map for analyzing the market. Sometimes the market is cluttered up with lots of different waves and recognizing the right situation becomes a little difficult. That's the place where experience comes in handy so practice as the thread goes forward so that you can get a better grasp of analyzing the market through this method.

Before I post next subject later, let's see if anyone can guess or draw a trend line in the next situation.

Next situation is a situation that happens lots of time and it's where the first wave is less steep than the second wave. Most of the time we have a small first wave and boom, the price explodes and moves with a very steep slope with a high speed. It's the opposite of previous type. Price starts moving fast and you don't know where you can enter. If you draw a line in the old fashion way, as I've drawn in the picture, you've drawn it incorrectly and you can't enter a position in the right time. So what's the right trend line here?

I'll post the answer tomorrow but before that let's see if anyone has an idea. Please share your thoughts.

By the way if you have any experience about the subjects that have been told so far, please share them.

From below the candles

BTW, great thread, great teacher. Keep it up bro

there are no trendlines in forex because you trade pairs.

Thanks, bro and if you mean drawing the line using the lows of wave 1 then you're right. I'll explain that more in the next post that I've prepared and I'll send it in a few moments.

The second type is where the first wave is (so) gentle than the second wave and most of the time wave 2 is too volatile and move very fast and also it's much longer than wave 1. In this situation if you draw the line from highs (in bearish) and lows (in bullish), the only thing that your trend line shows is the direction of the trend and it doesn't serve as a support or resistance and it's not even a correct trend line because the price has lost its previous balance and now has a new equilibrium with a steeper angle. In some occasions that the price reaches the wrong trend line is because of other situations such as a higher timeframe trend line or a support/resistance etc that have overlapped with the wrong trend line not because of that trend line.

This type of situations are a bit trickier though and finding the correct candles need more experience and also noticing to price action more, but fortunately if you make mistakes in finding the right candles and drawing a correct TL, most of the time you end up making profit; because the speed of price in wave 2 is too high and the corrections are not too much.

In general we should connect the lows of wave 1(in bearish) and highs of wave 1 (in bullish) but this time we need to pay attention to several things. First our trend lines should be confirmed by price action. It means when we connect first 2 or 3 candles we need to see the confirmation of the line in the next candles at the same wave 1 and most of the time a confirmation of a candle in wave 2 (look at the pictures). Second, our trend line must be steeper than the old-fashion trend line (for example the wrong one in the previous post). Third, the longer the wave 2 is the steeper trend line we have to choose which means our priority is the steeper TL if there are other possible TLs. Let's analyze the previous example to clear it up more.

As you can see this type of situation is a little bit trickier and needs more experience but it's a profitable one as well. The good news is most of the time you make profit in this type either you draw a trend line less steep, which you don't enter the market, or you draw that completely correct or with a little mistake that you end up making profit.

You need to know that there are other situations such as horizontal support and resistance that happen in some occasions and also lines in higher timeframes that should be brought into consideration while analyzing, so we need the whole map to enter a position with a high probability of win. We'll talk about other situations in the next posts. But don't forget to practice. As you've seen, that's really vital in this method.

Thanks bro. Hope you find some time to continue to the next steps