Line Trading

Here is a lovely example of a GBPUSD uptrend on the H4 chart.

In hindsight, From the 2 trend-lines we can see that it is possible to have traded this move profitably from the start around 7th June, right up to around 25th July, using a few simple trend-lines.

I have never liked/used drawing object indicators, because -
1) There is a subjective element in deciding where to draw the lines.
2) Drawing the lines is a manual process.
3) Managing the trade is a fully discretionary process.
4) Combining the subjective manual drawing of lines, with the discretionary trade management could create confusion, and induce a lack of discipline. i.e. when the trend line is broken in some way, instead of exiting, it would be possible to tweak the angle of the trend-line slightly, lowering the right hand side of the trendline, ensuring that price was still above the trendline, and you still had reason to be in the trade!

What i would like to know is, how could/should/would a trader going about trading this uptrend, using trendlines similar to the two trendlines that have been drawn.

If this uptrend had been successfully traded from start to finish, for obvious reasons, it would seem best to have traded this trend in as fewer round turns as possible.

What do you think would have been the best way to have traded this move?

How many times would you have exited a trade, before re-entering (presumably long), and on what basis would you have exited, before re-entering?

How many trendlines do you think you would have drawn to cover the curation of this uptrend?

Many thanks .

hi jt,

seems like you spotted a pitchfork setup - failure

have a look

edit: second pitchfork. there is a first pitchfork from 97ish

Hi jac

your screenshot is interesting.

I don't see many entry opportunities in your shot in the form of bounces off the trendlines, as you need 2 bounces before you can draw a trendline, and you'd then be looking for a 3rd bounce off the TL b4 looking to enter, if you catch my drift.

I see the breaking of the Resistance levels as the main entry opportunities in your screenshot.

TL's & trend look so easy in hindsight, and when the market is trending smoothly like this they can be used effectively..............

think of a pitchfork as a trend tool. tells you where the trend is going. there are many entries marked with the BO-pullbacks..... if the triangles dont help.

JTrader said:

Here is a lovely example of a GBPUSD uptrend on the H4 chart.

In hindsight, From the 2 trend-lines we can see that it is possible to have traded this move profitably from the start around 7th June, right up to around 25th July, using a few simple trend-lines.

I have never liked/used drawing object indicators, because -
1) There is a subjective element in deciding where to draw the lines.
2) Drawing the lines is a manual process.
3) Managing the trade is a fully discretionary process.
4) Combining the subjective manual drawing of lines, with the discretionary trade management could create confusion, and induce a lack of discipline. i.e. when the trend line is broken in some way, instead of exiting, it would be possible to tweak the angle of the trend-line slightly, lowering the right hand side of the trendline, ensuring that price was still above the trendline, and you still had reason to be in the trade!

What i would like to know is, how could/should/would a trader going about trading this uptrend, using trendlines similar to the two trendlines that have been drawn.

If this uptrend had been successfully traded from start to finish, for obvious reasons, it would seem best to have traded this trend in as fewer round turns as possible.

What do you think would have been the best way to have traded this move?

How many times would you have exited a trade, before re-entering (presumably long), and on what basis would you have exited, before re-entering?

How many trendlines do you think you would have drawn to cover the curation of this uptrend?

Many thanks .

Click to expand...

There is a common misconception that trendlines provide support and resistance. This is one reason why beginners tend to freak when their trendline is broken.

True support and resistance are more likely to be found where supply and demand have entered the picture before, usually in those areas where price has "paused" before reversal or continuation.

Look for those areas where price has moved sideways, even for only a seemingly trivial number of bars. Draw lines at the top and bottom of this sideways range. Then locate the next pullback, e.g., the pullback before June 28. Instead of attaching too much importance to the trendline, look to the left.

With all this in mind, you needn't have exited at all until support was broken earlier this week. As to hindsight, you can see whether or not support is being broken in real time. Trade support and resistance and the trend -- and trendline -- will take care of itself.

Db

JTrader said:

Hi jac

your screenshot is interesting.

I don't see many entry opportunities in your shot in the form of bounces off the trendlines, as you need 2 bounces before you can draw a trendline, and you'd then be looking for a 3rd bounce off the TL b4 looking to enter, if you catch my drift.

I see the breaking of the Resistance levels as the main entry opportunities in your screenshot.

TL's & trend look so easy in hindsight, and when the market is trending smoothly like this they can be used effectively..............

Click to expand...

that wasnt hindsight........it was my market map.....this is the first pitchfork

http://www.trade2win.com/boards/attachment.php?attachmentid=28445&d=1184346664

posted here

http://www.trade2win.com/boards/showthread.php?p=345832#post345832

and this is the second pitchfork posted here

http://www.trade2win.com/boards/showthread.php?p=345832#post345832

dbphoenix said:

There is a common misconception that trendlines provide support and resistance. This is one reason why beginners tend to freak when their trendline is broken.

True support and resistance are more likely to be found where supply and demand have entered the picture before, usually in those areas where price has "paused" before reversal or continuation.

Look for those areas where price has moved sideways, even for only a seemingly trivial number of bars. Draw lines at the top and bottom of this sideways range. Then locate the next pullback, e.g., the pullback before June 28. Instead of attaching too much importance to the trendline, look to the left.

With all this in mind, you needn't have exited at all until support was broken earlier this week. As to hindsight, you can see whether or not support is being broken in real time. Trade support and resistance and the trend -- and trendline -- will take care of itself.

Db

Click to expand...

Thanks DBP -

Interesting.........

JTrader said:

Thanks DBP -

Interesting.........

Click to expand...

It takes a bit of practice to begin looking at price movement this way, i.e., as a succession of tests of demand and supply. Pretty good, though. But you did miss an important one, beginning with June 28 at the 2.0050 level . . .

(And note that that's the only time your line is "broken".)

Db

dbphoenix said:

It takes a bit of practice to begin looking at price movement this way, i.e., as a succession of tests of demand and supply. Pretty good, though. But you did miss an important one, beginning with June 28 at the 2.0050 level . . .

(And note that that's the only time your line is "broken".)

Db

Click to expand...

Gotcha!

This approach is interesting.

Knowing where to enter a trade, and where to set an SL exit, in relation to these lines is the bit i am unsure of at present, and this is where confusion can kick in. Because this seems a fairly subjective decision to make.....

Do you enter X pips above/below the surpassed S/R line,
Do you place your SL X pips above/below the back or front line of the sideways channel just broken,
Do you look to re-enter after takin an SL when price recrosses above/below the surpassed S/R line...etc. etc.

It's solid rules for trade entries, SL exits & SAR trades that i want/need to develop/learn for this style of S/R line trading. At the moment i feel a bit clueless about when/where to exit, and where to place a SL, and if/when it is appropriate to SAR.

Where would you look to enter a trade, and place a SL, in relation to the lines & sideways ranges?

Looking at the chart in hindsight, it is easy to say that we should have been trading long during this whole period.
However, in real-time, things are different, and we may have seen a valid reason based on the S/R lines/sideways ranges to have traded short.

Would a decision to SAR, or trade both long & short positions, have been made by you over this period?
If so, on what basis?

Many thanks.

Hi JT,

I don't trade GBP/USD but this would've been my analysis.

1. Fibonacci retracement/expansion lines
2. Break out of the asymmetrical triangle at the base of the move
3. Two trend channels developed
4. S/R levels along the way
5. Buy/sell near the bottom/top of channel but only with confirmation from a momentum indicator and a short period EMA.

Great move though!!

Hi

can one of the moderators please change the title of this thread to "Line Trading". I did this in my opening post, but in the search index it still appears as Trend-line trading".

The focus now seems to be on horizontal S/R lines more than trend-lines, so the title as it is, is slightly misleading.

"Line Trading" is a broader open-ended title...........

Thanks a lot.

Why do you wish to change the title ?


Paul

JTrader said:

Knowing where to enter a trade, and where to set an SL exit, in relation to these lines is the bit i am unsure of at present, and this is where confusion can kick in. Because this seems a fairly subjective decision to make.....

Looking at the chart in hindsight, it is easy to say that we should have been trading long during this whole period. However, in real-time, things are different, and we may have seen a valid reason based on the S/R lines/sideways ranges to have traded short.

Click to expand...

When you're observing this type of trade execution & management, you need to come to the table with a very definite plan of action.

Your template timeframe for instance will dictate where, how & when you enter. To a large degree it will also focus your risk & trade development-management.

As an example: if you're executing via say a 15min timeframe, then your supply-demand lines will be evident on that frame (peak & trough zones). To check the possible validity & strength? of these lines, simply scroll out a couple frames to an hourly or 240min reference to observe whether your potential s&r zones marry up with a prev hot zone?

That might then hone your radar into observing the higher timeframe area from the trigger of your preferred execution frame (the 15m chart).

All you're looking to achieve at the end of the day, with any form of price action measure,is to load the probabilities as much in your favor as possible. Once you arrive at your entry (high probability trigger), it's down to your trade management & risk profile matrix to engineer any (if at all) profit potential.

The hindsight comment is not really applicable at all if you know what you want, where to look & when to execute or not?

As for what to do when you arrive at your desired activity plan? - well, there are many options regards entries & stops. But I guess once you observe a break of one your supply-demand lines, then I'd want to check (& see) some kind of commitment or intent on the part of price to kick on? So, a pullback or 2nd touch/re-affirmation of said s&r bust would be nice to witness maybe? Just in case it's not looking to fake you out & hustle the scared money.

Stops needn't be large either if you get your entries stacked straight. Regardless of whether you're seeking an intraday strike or hanging back to check the initial progress of your trade, your management can be spread out (partial encashments etc) & position sizing compounded once & if the move develops.

But it all starts at your base. And the 1st decision comes down to which chart reference you're going to employ.

Rather than look at hindsight examples, why not configer an actual template as activity gears up for another week.

Recent corrective activity on this instrument (Cable) throws up a couple potential near term action zones.

These 2 are geared toward the potential kick back on the Pound to re-assert it's muscle from the past few sessions descent, but you can also scroll out & map your (continued?) shorting probabilities. You'd just draw your 240/60min potential supply-demand lines & cross reference them onto your 15min template, if that indeed was to become your basr frame.

The benefits I've found with this type of analysis, is to keep it very relaxed & simple.

You must have your guidelines & precise activity tools firmly in place & become extremely well versed in your aims & expectations.

For instance: If one of the supply-demand lines fails to measure up on a higher timeframe action zone, then it's put on the back burner for further reference.

A great deal will depend on your preferred trading plan & how you intend to base your decision making, but the less complicated you make it, the better imo

dbphoenix said:

There is a common misconception that trendlines provide support and resistance. This is one reason why beginners tend to freak when their trendline is broken.

True support and resistance are more likely to be found where supply and demand have entered the picture before, usually in those areas where price has "paused" before reversal or continuation.

Look for those areas where price has moved sideways, even for only a seemingly trivial number of bars. Draw lines at the top and bottom of this sideways range. Then locate the next pullback, e.g., the pullback before June 28. Instead of attaching too much importance to the trendline, look to the left.

With all this in mind, you needn't have exited at all until support was broken earlier this week. As to hindsight, you can see whether or not support is being broken in real time. Trade support and resistance and the trend -- and trendline -- will take care of itself.

Db

Click to expand...

Thanks everyone.


HI DB

do you prefer to draw lines at the highs and lows of this sideways range, or do you prefer to draw lines at the open & close of the candles that make up this sideways range?

Thanks again.

PS. below are my questions to you that i have copied from earlier in the thread. You may otherwise miss/have missed these because i edited the post, and added much of the content then, and other people had already replied to the thread by then......thanks.

Originally Posted by JTrader

This approach is interesting.

Knowing where to enter a trade, and where to set an SL exit, in relation to these lines is the bit i am unsure of at present, and this is where confusion can kick in. Because this seems a fairly subjective decision to make.....

Do you enter X pips above/below the surpassed S/R line,
Do you place your SL X pips above/below the back or front line of the sideways channel just broken,
Do you look to re-enter after takin an SL when price recrosses above/below the surpassed S/R line...etc. etc.

It's solid rules for trade entries, SL exits, profit taking, & SAR trades that i want/need to develop/learn for this style of S/R line trading. At the moment i feel a bit clueless about when/where to exit, and where to place a SL, and if/when it is appropriate to SAR. i do like my rules to be as mechanical in nature as possible...

Where would you look to enter a trade, and place a SL, in relation to the lines & sideways ranges?

Looking at the chart in hindsight, it is easy to say that we should have been trading long during this whole period.
However, in real-time, things are different, and we may have seen a valid reason based on the S/R lines/sideways ranges to have traded short.

Would a decision to SAR, or trade both long & short positions, have been made by you over this period?
If so, on what basis?

Click to expand...

JTrader said:

Thanks everyone.


HI DB

do you prefer to draw lines at the highs and lows of this sideways range, or do you prefer to draw lines at the open & close of the candles that make up this sideways range?

Click to expand...

It doesn't matter much. S&R will be found in a zone, not in a line. S&R are those areas where demand and supply have been encountered in the past. The point of testing them is to find out whether those forces are still at work. Price can therefore turn ahead of the zone, bounce off it, or penetrate it (sometimes substantially). If the demand or supply aren't there, there's no S/R.

As to where you enter and where you place your stops, that depends on how confident you are in your entries, how good you are at reading charts, how emotional you may get when stopped out, how readily you re-enter a trade that you just got tossed from. There's no point in setting a tight stop if you're going to freeze when it gets triggered. There's no point in setting a wide stop if you're going to disengage from decision-making in the event of a reversal and rely instead on hope.

Db

lets see if this example of eurusd can be an example of support turned resistance holding. the 4hr bar closed 30 seconds after the screen shot was taken.

no trade on my end, and no bias either

edit: there seems to be a down channel there, so updating a second chart.......90 minutes after the previous screenshot.......tempted to short it, but no thanks...enaged at the moment.

pitchforks

jacinto said:

that wasnt hindsight........it was my market map.....this is the first pitchfork

http://www.trade2win.com/boards/attachment.php?attachmentid=28445&d=1184346664

posted here

http://www.trade2win.com/boards/showthread.php?p=345832#post345832

and this is the second pitchfork posted here

http://www.trade2win.com/boards/showthread.php?p=345832#post345832

Click to expand...

J.

have noticed the pitchforks a few times in your posts. please can you tell me a little about what they are and the basics of them or where to find this info, am trying to improve my price only analysis and cant seem to find any info on these...thanks in advance .

by the way, legoland must be making some serious money out of you

bd.

Darvas ?

dbphoenix said:

It doesn't matter much. S&R will be found in a zone, not in a line. S&R are those areas where demand and supply have been encountered in the past. The point of testing them is to find out whether those forces are still at work. Price can therefore turn ahead of the zone, bounce off it, or penetrate it (sometimes substantially). If the demand or supply aren't there, there's no S/R.

As to where you enter and where you place your stops, that depends on how confident you are in your entries, how good you are at reading charts, how emotional you may get when stopped out, how readily you re-enter a trade that you just got tossed from. There's no point in setting a tight stop if you're going to freeze when it gets triggered. There's no point in setting a wide stop if you're going to disengage from decision-making in the event of a reversal and rely instead on hope.

Db

Click to expand...

Reminds me of the "Darvas" box method of trading

brutusdog said:

J.

have noticed the pitchforks a few times in your posts. please can you tell me a little about what they are and the basics of them or where to find this info, am trying to improve my price only analysis and cant seem to find any info on these...thanks in advance .

by the way, legoland must be making some serious money out of you

bd.

Click to expand...

Check your PMs Brutus

edit: and no, just a one off annual flat rate of 60 quid......have gone so many times now that the average cost per entry must be close to 3 quid