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Tradewinds

Random Line Theory

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There was thread on another trading forum that experimented with drawing random lines on a chart and looked to see if the market "appeared" to react to them. Search for "Random Line Theory" and you will find it.

 

A few people just didn't get it or didn't want to accept it.

 

From post #38.

 

http://www.traderslaboratory.com/forums/208/how-i-would-charge-trading-course-9505-4.html

 

Thanks for saving me the time and effort to prove what I intuitively knew and accidentally tested some time ago. Not with a child's scribbles, but I noticed how the market "reacted" to stray lines on a chart.

 

I have heard other things too. A trader I know showed me a chart of the weekly Es back into 2008 and he showed me how " to the tick" it bounced off the low of a weekly bar back in 2008 and he took it short. Well, the fact is that a continuous contract chart of any futures contract plots an estimate or representation of where the market was then relative to now. A Zenfire chart may not be the same as esignal or TS. So, everyone is looking at a different low for that week back in 2008. And the fact is that the low was not the real low of that week in 2008 if you were there live in 2008 and is probably off by about 5, maybe 10 points.

 

Nothing begins until you enter the market so if its going to get you into the market and you are smart enough to learn how to take money when you are in it then scribble, dart, or Fib is just fine.

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I'm not a fan of trend lines at all. I will not use them. However, I don't discount people's ability to use them and make a profit. My theory is, that when people use trend lines, the trend line provides a framework of comparison. This framework of comparison allows the trader to make relative decisions. So it's not that the trend line has any real statistically predictive value in and of itself, but they provide a framework of comparison for the trader. So the decision making really comes from that framework of comparison. If my theory is true, then the trader could put any lines on the chart, at any place, and the trader would still be able to see relative changes, and make a relatively better decision than not. If the probability for good entries goes over 50% percent, and the trades are managed correctly, then a net win is realized.

 

So again, my theory is that the trend lines don't necessarily have any statistical accuracy in and off themselves, but it's all about how the trader processes that information in front of them. And the plot lines provide a point of reference for contrast and comparison. The the real value is in the contrast and comparison, not in the trend line itself. Regardless of where the trend line is positioned, the trader can compare price action and see price behavior relative to the trend line.

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They (trend lines) have been tested in my office for several markets...no sale here

 

But by all means continue as you were ladies and gentlemen and best of luck to you

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They (trend lines) have been tested in my office for several markets...no sale here

 

But by all means continue as you were ladies and gentlemen and best of luck to you

 

What do you use to trade Steve?

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What do you use to trade Steve?

 

I have posted quite a bit about methods that can be used in my thread titled "Ideas for Struggling Traders". The thread was started a while ago and the information is a bit dated by now.

 

In my thread titled "An Institutional look at the S&P Futures" I outline a method that uses TBP (time based pivots) among other concepts..

 

I use the concept of "Supply/Demand analysis" to determine where to entry and exit on any time frame, and the concept of "confluence' is helpful for those who are risk averse. I can use "Market profile data", the concept of "wholesale/retail value', and ultimately if I want a very high probability outcome I just "read the tape".....I adapt to what I see in front of me...

 

Finally although it really "doesn't count", about a year ago a gentleman in our offices challenged me to trade the RTH session without charts, just hearing the pit call (the S&P big contract), and for grins we both gave it a shot....

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