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Enigmatics

A Few Questions About Trading the Trendlines

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I've recently been trying to tighten up my ability to draw the right trend lines, horizontal lines, and identifying trade channels.

 

Do you guys have any specific pointers that could help? Furthermore, how reliable are trend lines on smaller time intervals like a 2min?

 

I was having a bit of success pairing 2min charts with 5min and trading breaks on ETF's of prior resistance levels. I've suddenly hit a brick wall. I have been a little too focused on 2min (kind of ignoring the 5min) and trying to attack every horizontal resistance level I marked with very little distinction. Suffice to say I've suddenly been very unsuccessful. I feel like my little run with scalping 8-10 ticks was fool's gold.

 

The reason I bring up the issue with the horizontal resistances is that I rarely (if ever) have bought the dip and I want to be able to with confidence instead of constantly relying on breaking of resistances. This becomes harder and harder to do if the volume dries up as the trading day moves on and the algos run amuck.

Edited by Enigmatics

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  clmacdougall said:
How are you drawing your trendlines now? Please explain how you construct your trendlines and then maybe others can help.

 

Sure thing. I'm always up early for pre-market. I trade a lot of SPXU and FAS. I make sure to mark a horizontal line for every resistance or support they make. Here are two examples on a 2min chart of the trading channels I missed today. For the trend lines I look for two common points in a straight line of the channel on the top and on the bottom. Drawing them afterwards it feels like it was a no-brainer so I don't know what I was thinking at as they took place.

 

Again I've marked these where I felt like I missed the obvious, but maybe there's more to it.

 

SPXU

27thsk.png

 

FAS (EDIT: I wrote SHORT ON SUPPORT, but I meant SHORT ON RESISTANCE)

bunlyg.png

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  Enigmatics said:
Sure thing. I'm always up early for pre-market. I trade a lot of SPXU and FAS. I make sure to mark a horizontal line for every resistance or support they make. Here are two examples on a 2min chart of the trading channels I missed today. For the trend lines I look for two common points in a straight line of the channel on the top and on the bottom. Drawing them afterwards it feels like it was a no-brainer so I don't know what I was thinking at as they took place.

 

Again I've marked these where I felt like I missed the obvious, but maybe there's more to it.

 

SPXU

27thsk.png

 

FAS (EDIT: I wrote SHORT ON SUPPORT, but I meant SHORT ON RESISTANCE)

bunlyg.png

 

those lines are draw in hindsight... not much use in real time trading.

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  Tams said:
those lines are draw in hindsight... not much use in real time trading.

 

That's precisely why I'm asking. So do you not use them at all? I just want to find a way to get more comfortable buying dips. I figured better trendlines would help me.

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  Enigmatics said:
Sure thing. I'm always up early for pre-market. I trade a lot of SPXU and FAS. I make sure to mark a horizontal line for every resistance or support they make. Here are two examples on a 2min chart of the trading channels I missed today. For the trend lines I look for two common points in a straight line of the channel on the top and on the bottom. Drawing them afterwards it feels like it was a no-brainer so I don't know what I was thinking at as they took place.

 

Again I've marked these where I felt like I missed the obvious, but maybe there's more to it.

 

SPXU

27thsk.png

 

FAS (EDIT: I wrote SHORT ON SUPPORT, but I meant SHORT ON RESISTANCE)

bunlyg.png

 

Hi Enigmatics,

 

Could I clear up one thing before we go ahead. Are you confused about trendlines or channels. They are two totally seperate things and I'm not sure we're on the same page when you mention the placement of your trendlines'.

 

You have shown pics of channels and what you consider support and resistance lines but none of trendlines . Please include how you incorporate a trendline in this scenario. I wonder if part of the problem is that you are using your channels as trendlines.

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  Enigmatics said:
I've recently been trying to tighten up my ability to draw the right trend lines, horizontal lines, and identifying trade channels.

 

Do you guys have any specific pointers that could help? Furthermore, how reliable are trend lines on smaller time intervals like a 2min?

 

I was having a bit of success pairing 2min charts with 5min and trading breaks on ETF's of prior resistance levels. I've suddenly hit a brick wall. I have been a little too focused on 2min (kind of ignoring the 5min) and trying to attack every horizontal resistance level I marked with very little distinction. Suffice to say I've suddenly been very unsuccessful. I feel like my little run with scalping 8-10 ticks was fool's gold.

 

The reason I bring up the issue with the horizontal resistances is that I rarely (if ever) have bought the dip and I want to be able to with confidence instead of constantly relying on breaking of resistances. This becomes harder and harder to do if the volume dries up as the trading day moves on and the algos run amuck.

 

 

Hi Enigmatics,

 

I use the Metatrader 4 platform to trade ForEx and I have great experiences using Tom DeMark Trend lines. DeMark uses the two most recent (Fractal) Highs and Lows to draw them. Next to that there are some "qualifiers" that tell you whether a trend line break is valid for trading or not.

 

If you Google "Tom DeMark Trendlines" there is plenty to learn about it. Here's a PDF to read some more on the subject.

 

Happy Trading!

 

Cheers,

 

Peter a.k.a. Dutchie

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  Dutchie said:
Hi Enigmatics,

 

I use the Metatrader 4 platform to trade ForEx and I have great experiences using Tom DeMark Trend lines. DeMark uses the two most recent (Fractal) Highs and Lows to draw them. Next to that there are some "qualifiers" that tell you whether a trend line break is valid for trading or not.

 

If you Google "Tom DeMark Trendlines" there is plenty to learn about it. Here's a PDF to read some more on the subject.

 

Happy Trading!

 

Cheers,

 

Peter a.k.a. Dutchie

 

I absolutely love TD Lines, please tell me how extensively you use them and for how long you've found them to be successful? I have studied them in depth and found them to be great trading tools as the last part of your decision making process after you have decided which side of the market to be on.

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  clmacdougall said:
I absolutely love TD Lines, please tell me how extensively you use them and for how long you've found them to be successful? I have studied them in depth and found them to be great trading tools as the last part of your decision making process after you have decided which side of the market to be on.

 

Hi,

 

I always use them, together with my (customized) DTosc, which is a combination of Stoch./RSI. When using proper money management (duhh), they are VERY useful!

IMHO they tend to work better on the 60 min timeframe or higher. There are several TD Trendline indicators circulating the trading forums but I prefer the ones with the qualifiers although they're easy to memorize. If you are familiar with trading differently shaped triangles (my absolute favorite pattern) it's easy to set your profit targets too.

 

Happy Trading!

 

Cheers,

 

Peter

Edited by Dutchie

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  Dutchie said:
Here's a PDF to read some more on the subject.

 

  • Trendline drawing can be very subjective - 10 people, 10 different trendlines
  • Rules may be inconsistent.
  • Need validation that trendline is correct
  • Continue at trend break, or reverse? That's the question.
  • Draw trendlines from Right to Left. Insures using the latest data.
  • 4 different qualifiers to decide what to do.
  • Something about a bar's "TRUE" high or low. Rules, but I don't know what the logic is.
  • 3 Rules for abandoning the trade: Rules apply to the bar after the entry bar.
  • Next bar opens below breakout level - Abandon trade (Long)
  • Next bar opens below the previous close and closes down - Abandon trade (Long)
  • Fails to make higher high - Abandon trade (Long)

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  Tradewinds said:
  • Trendline drawing can be very subjective - 10 people, 10 different trendlines
  • Rules may be inconsistent.
  • Need validation that trendline is correct
  • Continue at trend break, or reverse? That's the question.
  • Draw trendlines from Right to Left. Insures using the latest data.
  • 4 different qualifiers to decide what to do.
  • Something about a bar's "TRUE" high or low. Rules, but I don't know what the logic is.
  • 3 Rules for abandoning the trade: Rules apply to the bar after the entry bar.
  • Next bar opens below breakout level - Abandon trade (Long)
  • Next bar opens below the previous close and closes down - Abandon trade (Long)
  • Fails to make higher high - Abandon trade (Long)

 

DeMark trendlines AND their qualifiers are NOT subjective if one can read: "If any of the four qualifiers are true, the trendline break is valid" which leave all your other remarks pointless.....

Edited by Dutchie

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  Dutchie said:
DeMark trendlines AND their qualifiers are NOT subjective if one can read: "If any of the four qualifiers are true, the trendline break is valid" which leave all your other remarks pointless.....

 

I wasn't stating that DeMark trendlines are subjective. The bullet points were taken directly from the PDF file. The PDF file stated that a problem with many trendlines is that they are subjective. That statement was made to contrast the objectively of the DeMark trendlines. Again, what I wrote was just a rewording of what is stated in the PDF file. I wasn't criticizing the DeMark method of trendlines.

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I studied Drummond Geometry for a couple of years and his method of drawing lines is different from the mainstream. His approach draws lines using only 2 bars in order to forecast S/R for the 3rd bar. I found some other combinations in my own work that I also included in an indicator. Unlike anything that is out there my indicator prints a # above and below the bar showing how many tics the high or low is from the termination point of the TL for the current bar. If you are using your method on a 5min chart and you want confirmation that you have hit a S/R level you can apply my indicator to a higher timeframe like a 30min to see how many tics you are from a current TL. The amount of tics away from a TL that would be a heads up will vary from market to market. I have only ever traded the Russell so all I can attest to would be that anything 5 and under would be a warning that a turn is evident. I have included an Eld file (I hope I did it right ) for the indicator.You guys can have it for free.

PI TL #.ELDFetching info...

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One confirmation that you could use to get into the trend is say we're at support. Whichever time frame you are using, wait for a break of the high of the low bar before entering long. The same holds true for shorts, wait for a break of the low of the high bar.

 

So if the ES is in a downtrend and rallies off lows, you can just wait for a break below the low of the highest bar on the way up. This also allows for a definitive stop to be placed above the high of that high bar.

 

Just my two cents on a little added entry signal.

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