I was with a close friend of mine also a trader a few days ago, he told me that "trendlines do not work" and i am in several social media trading groups and some traders share the same opinion regarding the charting tool.
The reason for this is that some traders rely on the basing's that they have been taught or read without taking the time to backtest and get experience , in the trading world you find that theory is a different playing field compared to practical. A trading book may teach to for example , buy breakout of bearish but when traders use this methodology they experience price false breakout , leading to getting stopped out ,but this does not mean the trendline was invalid. Or in another setup they are taught to sell the touch on bearish trendline , then the price rallies and breaks the bearish trendline , this also does not mean that the trendline was invalid.
I for one do not take trade signals off trendlines unless there is other factors of confluence in line with the trendline.
see , trendlines are used too illustrate prevailing direction of price by connecting highs and lows , so alone they don't give much indepth when analysis apart from mapping out current trend.
from my experience and hours of backtesting there are 2 ways i use trendlines. NB: I NEVER ANALYSE PRICE CHARTS WITHOUT USING TRENDLINE.
I hope my methodology on trendlines can help make your chart work easier.
1. Momentum
Momentum measures the rate of change in prices as opposed to the actual price changes themselves. Momentum is measured by continually taking price differences for a fixed time period , this is why sometime trendlines have to get readjusted to suite current market conditions.
Trendlines can be used as a leading indicator of momentum for example , when price breaks a bullish trendline , it does not mean sell immediately or it is not a sell signal , all that it means is that momentum has shifted from bullish to bearish , meaning that you should look for sell setups that are inline with your criteria or strategy vice versa for break of bearish trendline. These setups are called momentum setups. another type of momentum setup is when for example , price is creating higher highs and higher lows connecting the higher lows gives a bullish trendline , as long as price is trading above the trendline it indicates bullish momentum meaning high probability of valid setups are buy setups given that price is above , vice versa for bearish trendlines
2.Dynamic support and resistance
Dynamic support and resistances levels are levels are not horizontal or static. When price trades above trendline it is more likely to pull back and test the trendline as support indicating bullish momentum , or it can come and break below (false breakout) and react off it as resistance indicating bearish momentum. This methodology is complex and its important to understand the order flow and using top down analysis to get a higher probability of knowing which move is valid.
These methods also are important for traders who prefer trading inline with the current trend , as most time it pays to trade with the trend than against it.
I thank God for my failures , maybe not at the time but surely after reflection. I never feel like a failure just because something i tried failed - Dolly Parton
The reason for this is that some traders rely on the basing's that they have been taught or read without taking the time to backtest and get experience , in the trading world you find that theory is a different playing field compared to practical. A trading book may teach to for example , buy breakout of bearish but when traders use this methodology they experience price false breakout , leading to getting stopped out ,but this does not mean the trendline was invalid. Or in another setup they are taught to sell the touch on bearish trendline , then the price rallies and breaks the bearish trendline , this also does not mean that the trendline was invalid.
I for one do not take trade signals off trendlines unless there is other factors of confluence in line with the trendline.
see , trendlines are used too illustrate prevailing direction of price by connecting highs and lows , so alone they don't give much indepth when analysis apart from mapping out current trend.
from my experience and hours of backtesting there are 2 ways i use trendlines. NB: I NEVER ANALYSE PRICE CHARTS WITHOUT USING TRENDLINE.
I hope my methodology on trendlines can help make your chart work easier.
1. Momentum
Momentum measures the rate of change in prices as opposed to the actual price changes themselves. Momentum is measured by continually taking price differences for a fixed time period , this is why sometime trendlines have to get readjusted to suite current market conditions.
Trendlines can be used as a leading indicator of momentum for example , when price breaks a bullish trendline , it does not mean sell immediately or it is not a sell signal , all that it means is that momentum has shifted from bullish to bearish , meaning that you should look for sell setups that are inline with your criteria or strategy vice versa for break of bearish trendline. These setups are called momentum setups. another type of momentum setup is when for example , price is creating higher highs and higher lows connecting the higher lows gives a bullish trendline , as long as price is trading above the trendline it indicates bullish momentum meaning high probability of valid setups are buy setups given that price is above , vice versa for bearish trendlines
2.Dynamic support and resistance
Dynamic support and resistances levels are levels are not horizontal or static. When price trades above trendline it is more likely to pull back and test the trendline as support indicating bullish momentum , or it can come and break below (false breakout) and react off it as resistance indicating bearish momentum. This methodology is complex and its important to understand the order flow and using top down analysis to get a higher probability of knowing which move is valid.
These methods also are important for traders who prefer trading inline with the current trend , as most time it pays to trade with the trend than against it.
I thank God for my failures , maybe not at the time but surely after reflection. I never feel like a failure just because something i tried failed - Dolly Parton
Comment:
i never analyse without trendline
