A simple price action approach

[metal]

Quote from Xspurt:

Great examples Metal. Just wondering why you don't adjust you channels as per attached chart. Also do you use levels or just channels.

The arrows show back tests on the channel line.

Xspurt,

As I stated early on trendlines are not always science, there's an art aspect as well. In this case I cloned the trendline to a lower swing low than the one between my two points because that was largely noise and this lower swing low is clearly of importance.

You can experiment with cloning a trendline to successive swing lows, for example, and see if you like that approach. It works, too.

There's a case to be made for adjusting trendlines but I want to see pierces, this is where entries and exits come from. Even if a trendline is pierced I will hesitate to adjust it unless the newly created swing is of fairly major size. The other consideration is that a channel only works for so long (ie not very long) and you want to be on board at its inception. By the time you adjust your channel everyone in the world is aware of what's going on and the game is over.

Yes I do use levels, but probably not in the conventional sense. I will introduce those ideas shortly.

metal

 

[metal]

Quote from PABuster:

Thanks for the good post Metal.

At what point do you start taking counter trend signals. With the benefit of the hind sight I can see that one can switch from drawing UTL from DTL. For example in your 2nd chart. when price did a HH around 14:00, I would have redrawn the UTL with the 2nd pivot of the utl to the new HL & still would be looking for longs. But in your case you drew the DTL & taking shorts.

Thank you for the good examples.
Buster

Glad you like the posts, B.

I try not to take counter-trend signals unless they're like what NoDoji described in one of his posts. That is, for example, if a larger time frame chart (like the 60min) is in an up trend and I have a 5min downtrend, then I would consider a counter-trend long entry off the 5min copied trendline, the one running under price.

As soon as you get a HH, you start drawing an UTL. The last short was about 11:00 and by the 14:00 HH I wasn't looking for shorts anymore, especially since the last short didn't hit the target before price reversed. I didn't draw it but from that point on I was looking for longs.

Hope that answers your question.

metal

 

[NoDoji]

Metal, great trade, great charts and many thanks for one of the best threads on ET. I've become a rabid channel surfer!

ADD: Just saw your last post. I'm a "her"

 

[metal]

Quote from NoDoji:

This style of trading requires a proven track record of calm, disciplined trading and the ability to trade in the direction of a trend. If you've broken your rules more than once or revenge traded at any time in the past couple of months, DO NOT attempt this style of trading because it will mess with you psychologically.

Thanks to you and this thread, metal, I've been using this tactic a lot lately. It's especially effective early on, draw your channel lines as soon possible. As the channel matures, there are more head fakes. In fact, I now play the off stop runs when the channel becomes obvious to even legally blind traders

Very right, NoDoji. So far I've agreed with everything you've said here. lol. I'm glad the info is helpful.

metal

 

[metal]

Quote from afto:

Very nice thread Metal.

Do you believe that breaks of the initial trendline (not the parallel channel) are more significant and predictive in nature?

Thank you.

afto,

The initial trendline is everything. Once price responds to it you have some very valuable information. Is it being rejected or followed? If rejected you take your small stop and look for the next trade. If it's being followed you have a potential winner. The cloned trendline is much less useful in this respect.

 

[crazyAtrader]

Channels should not be readjusted for two very important reasons.

#1 You want to see the breakout failures

#2 After these failures, occur, now "heads" you want to see the shoulders. Shoulders holding represent continuation, shoulders breaking represent potential reversal.

Little vague but you gotta do your homework to make good sense out of it.

Crazy A

 

[IanMacQuaide]

Quote from metal:

afto,

The initial trendline is everything. Once price responds to it you have some very valuable information. Is it being rejected or followed? If rejected you take your small stop and look for the next trade. If it's being followed you have a potential winner. The cloned trendline is much less useful in this respect.

Metal, please elaborate on that last statement?
How is the cloned TL less useful since it's the TL that completes our "Channel", and is a guideline for Profits, yes?
<lost

 

[metal]

What I meant was that the initial trendline sets the stage for the whole trade. If price doesn't respect it then there is no case for the cloned one. But of course once things are rolling we'll need it for the exit.

Quote from IanMacQuaide:

Metal, please elaborate on that last statement?
How is the cloned TL less useful since it's the TL that completes our "Channel", and is a guideline for Profits, yes?
<lost

 

[IanMacQuaide]

Quote from metal:

What I meant was that the initial trendline sets the stage for the whole trade. If price doesn't respect it then there is no case for the cloned one. But of course once things are rolling we'll need it for the exit.

Got it. Thanks!

 

[NoDoji]

I've been placing equidistant channel lines during periods of consolidation following strong trending moves. This was amazingly useful today when an apparent bear flag channel broke upside and price headed straight to the next line.

There was a pullback to the 20-bar EMA on the 5-min chart, where it took me two attempts to get long. My first long entry was so perfect I felt like a trading goddess. It ran about 15 ticks and I assumed it would just keep going, so I moved my stop to b/e. Came back to my stop, ticked me out and took off again. It was quite sneaky, you can't even see it on a 1-min chart, only on a tick chart. No matter, because after running 30+ ticks without me on board, it came all the way back to my initial entry level again and stopped at support.

Quadruple support is good enough for me and I got right back in. This time the move was solid. The levels I wanted to see break out to keep me in the trade were:

> Previous resistance in the 98.40's

> Previous support in the 98.90's prior to the huge sell off, which coincided nicely with the secondary channel line as price got there.

> The upper channel line of a new channel drawn following support at the 20 EMA (darker lines on the chart)

> Pre-selloff resistance near 99.70, which ended up coinciding with the tertiary channel line

All levels were reached and broken through.

However, I got antsy when price found initial resistance @ 99.49, those .50's and .00's can be strong. I exited off that R level.

(Re-entry tactic to follow.)