Hi TBSTBS said:
Sorry Mark, but this is completely wrong.
A trendline requires two points (not three) the first point should be a reaction low if looking at a bull trend or a reaction high if looking at a bear trend.
The second point is ideally a second reaction high or low, but not necessarily, it may also be a level of support or resistance.
This is used particularly on breakouts, when the price charges up (or down) at an unprecidented and unsustainable rate (and thus is more likely to retrace than anything else). In this situation the trendline is linked from the high or low to a point along the broken support or resistance level, in line with the price action. The reamina like this until a second more established point is made.
Trendlines do not 'work' because 'everyone sees them', I've never read such rubbish!
They are an ever-changing level of support or resistance, points at which the buying pressure or selling pressure is sufficient to hold the price action - giving you your next points in the trend, not the other way around.
I thought I would start a new thread for this, as I wanted to keep the Basics of Trading thread, directly related to the subject.
First of all, as you know, I have the greatest respect for you as both a trader and a teacher. I think this confusion has come about, because I haven't explained myself properly, and I'm more than happy to amend my original post in any way to make it clearer.
With regards a trendline having 2 points. I fully understand what you are saying, but what good is a trendline if it isn’t tested.
This would be a valid trendline if it got hit. The idea is that price should reverse if it tests the trendline again. Correct?
If the price doesn’t stop at this trendline, then I would call it invalid. I wouldn’t necessarily expect it to fall faster.
I can’t think of any other way of explaining it. If no-one saw price support at a certain level, then it wouldn’t reverse, the support value becomes just another number.Trendlines do not 'work' because 'everyone sees them', I've never read such rubbish!
I hope I’ve explained what I meant a bit better, and I welcome any further comments you have