Do Trendlines work?
- Thread starter duard
- Start date
I was responding to epetrov's questions that came up from the post you made which included the chart.
Frankly, I thought that your post did inspire epetrov to ask some pertinent questions.
You chart did two things: inspired questions and provided a good example.
Here is a question or so for you.
When did you stop trading BO's of TL's and why?
How long have you been zooming in on unfolding situations to make more sensitive trades?
What techniques do you use to assure that you pick off the better "runs" (great price movements)?
I'm sure your answers will help a lot of people out.
Q. When did you stop trading BO's of TL's and why?
A. I never really traded BO's of TL's exclusively. I have always used TL's, S&R lines, SMA's, and volume. As to why I use these things it is because all of them can act as support or resistance, except volume which shows recent pressure. The key is to understand which one is currently the most support and the most resistance for the instrument you are trading.
Q. How long have you been zooming in on unfolding situations to make more sensitive trades?
A. I don't always, it really depends on the time frame I am looking at the trade for. If I am looking at something like a calendar spread or Dbl Diagonal with the back month 3 months out there is no need to zoom into say an intra-day chart to try and get the entry that precise. If I am looking at a quick 2 or 3 day trade then I might zoom into the intra-day range and try and get in at a more optimal level during that day. Since I do have a normal day job that I can sometimes but not always make trades at that can also play a part in my timing...for better or for worse.
I might eventually go to trading only but the job I have is a good paying gravy job with excellent benefits so it's kind of hard to justify leaving.
Q. What techniques do you use to assure that you pick off the better "runs" (great price movements)?
A. I like to look at the S&R levels, sell off from last highs, buy-up from last lows, and trading ranges. I try to find trades where the distance I think it will move (up to next resistance or down to next support) is at least 2x greater than the distance I would need to get out in case it when against me...in other words a 2/1 reward/risk ratio. I guess my thinking is if I was looking at 2 trades one of which looked like it would move $4/share in my favor and could move against me as much as $6/share, and the other one looked to move $2/share in my favor or as much as $1 against me, I would take the $2 trade over the $4 trade due to the R/R ratio. Of course this applies more to directional trading than it does when you use options to get in "neutral" trades. If I am looking to use Iron Condors or Dbl Diags for a neutral position a lot of this changes as to what I am looking for. In those cases I am looking for the trends to not get broken and the S&R levels to hold and I am probably looking at longer term charts.
A. I never really traded BO's of TL's exclusively. I have always used TL's, S&R lines, SMA's, and volume. As to why I use these things it is because all of them can act as support or resistance, except volume which shows recent pressure. The key is to understand which one is currently the most support and the most resistance for the instrument you are trading.
Q. How long have you been zooming in on unfolding situations to make more sensitive trades?
A. I don't always, it really depends on the time frame I am looking at the trade for. If I am looking at something like a calendar spread or Dbl Diagonal with the back month 3 months out there is no need to zoom into say an intra-day chart to try and get the entry that precise. If I am looking at a quick 2 or 3 day trade then I might zoom into the intra-day range and try and get in at a more optimal level during that day. Since I do have a normal day job that I can sometimes but not always make trades at that can also play a part in my timing...for better or for worse.
I might eventually go to trading only but the job I have is a good paying gravy job with excellent benefits so it's kind of hard to justify leaving.
Q. What techniques do you use to assure that you pick off the better "runs" (great price movements)?
A. I like to look at the S&R levels, sell off from last highs, buy-up from last lows, and trading ranges. I try to find trades where the distance I think it will move (up to next resistance or down to next support) is at least 2x greater than the distance I would need to get out in case it when against me...in other words a 2/1 reward/risk ratio. I guess my thinking is if I was looking at 2 trades one of which looked like it would move $4/share in my favor and could move against me as much as $6/share, and the other one looked to move $2/share in my favor or as much as $1 against me, I would take the $2 trade over the $4 trade due to the R/R ratio. Of course this applies more to directional trading than it does when you use options to get in "neutral" trades. If I am looking to use Iron Condors or Dbl Diags for a neutral position a lot of this changes as to what I am looking for. In those cases I am looking for the trends to not get broken and the S&R levels to hold and I am probably looking at longer term charts.
The person who put the chart up failed to put in the TL after the last one he did put in.
1. put it in.
2. Put in the red box.
3. put in a pink line
4. estimate where the double pink line starts
5. Estimate where the yellow circle goes.
6. estimate where the next red box goes. [/QUOTE]
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Interesting though not easy to understand -where do the red boxes
come from for instance.
Is all this applicable to lower time frames as well - and if so which ones??
Thanks cd
Charly
1. put it in.
2. Put in the red box.
3. put in a pink line
4. estimate where the double pink line starts
5. Estimate where the yellow circle goes.
6. estimate where the next red box goes. [/QUOTE]
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Interesting though not easy to understand -where do the red boxes
come from for instance.
Is all this applicable to lower time frames as well - and if so which ones??
Thanks cd
Charly
#####################################
Interesting though not easy to understand -where do the red boxes
come from for instance.
Is all this applicable to lower time frames as well - and if so which ones??
Thanks cd
Charly [/QUOTE]
The red boxes are the majot inefficiency of Break Out (BO trading) and what makes BO trading so sophomoric.
trading with TL's only is what leads to BO trading.
The entry on a BO, in the first place is at the right side of the red box, which means for a TL trader the trend is beginning at the BO.
He makes money by following the TL until it ends. It ends with a BO as usual.
So in effect his trade from BO to BO means he has made the money along the TL and nothing more,
There is no wy to make less money in a trend from beginning to end.
This beginner level trading leaves a lot to be desired.
The greates price change in a trend is generally from the left extreme corner to left extreme corner of red box to red box.
The problem for beginner traders is that they never get to reasoning through how to make more money with the charts they are looking at.
I posted the redbox only chart to try to wake up the reader's mind to the fact that TL's overlap. As opinted out a person does not have to draw TL's very well to make a cretain level of money.
A TL traded from BO to BO makes much less money that trading a TL from its beginning (when you know you can draw the beginning point of the TL) to the beginning of the next TL.
The Q. comes up: How do I know where the TL really begins?
I took a stale chart to show just the overlap to begin the possibility for people to think. There were so many red boxes is the deeper reason I chose the chart.
For an expert each bar on that chart has 20 red boxes, for example. 20 times 250 is 5,000 trades a year from one end to another of red boxes. For one contract and a length of 1 point in ES that is 250,000 dollar for 1 contract non compounded each year.
Knowing this, a person sees that 2,000 dollars margin can provide 250,000 dollars a year if he can draw red boxes and use the price at the conrner to enter and reverse twenty times a day.
I showed additional chart annotations, step by step to show how to get to be able to see where the red box starts. No one followed up. That is fine. I did not make it clear enough to prompt any remarks except that the original chart poster explained to me that drawing TL's doen'y have to be accurate. For beginners to stay beginners this is a common reason.
If a red box follows a yellow circle and a yellow cicrle follows a double pink, then it is easy to find red boxes.
I have seen fifth graders teach their wealthy fathers to learn to do this in private schools in Hollywood after the children had two one hour classes with me. Other parents were bitching about why their kids didn't geet the classes.
A pink line makes a TL into a channel. This gives a person the envelope of price for the duration of a channel. This step is the first one a person takes towards leaving beginner and advancing to advanced beginner.
A person still does not know when a channel begins and ends, however. BO is NOT the place, it turns out. A person will never get out of beginner unless he learns this.
This is a harsh place to have to find yourself by reading. For fifth graders it is more fun than learning about anything else, especially for girls. They get to inform their fathers that they can make more money than dad can.
there is almost no fifth grader that will not ask how a red box starts. actually they do not use red boxes, they use "end effects of trends".
Everyone learning to trade, at one point of another asks himself when does a trend end. they get the wrong answer as we all know and they express satisfaction with this result. You can read that right here in the last few days.
Price cannot advance in the direction of a trend because it becomes limited in movement by one causal factor. Not many people can think this kind of thing through. They are already satisfied with BO trading and want to stay beginners.
All traders regard themselves as smart and they are even great poker players. You can bet on that. For all I know they got grades in school by betting on the most likely answer at state college while taking multiple choice tests that they had out of the fraternity files in advance.
Making a lot of money is different. Smart people invent their own ways to do itis the major myth in this realm. Other people ask these smart people how they learned to do BO trading so they could stay beginners.
Lets say in the near future someone posts a chart with two market variables on it and their are trend lines, pink lines,yellow circles and red boxes on Price. What is annotated on the other valriable? Pace, peaks, troughs, and boundaries between the peaks and troughs and PRV (Pro Rata volume).
The correspondence is:
breakout = trough Fun to throw the least important on the table first. you hold through the BO because you are already in the trade.
Pace = money velocity. Here you know how fast you will be making money. Use these: Extrodinary, High, Medium, Low, DU, and VDU. You can now change the money made per trend of the 5,000 a year from 1 point average to the points for each pace. The pace distribution is a catennary. And there is a normal distribution of volatility for each pace. This mean for a given pace you know how long the bars will be during a trend and how much they will overlap.
Peaks = turning points for price (applies equally to longs and shorts) in the direction of the trend. So now you know when the pink line will be hit AND you know when the pink line will be crossed. Trade more often than each trend. Add four times the trades than the 5,000 if you want to be more efficient and get to intermediate. you can use the 1 point value here and make the 5,000 a value of 20,000 times 50 dollars for a year. It is a round number with 6 placeholders to the right of the 1. 1,000,000.
troughs = support on non stationary price time space. This is the end of the popular retrace that leads chicken traders to only trade a trend after the retrace. This is not the time when a reversal takes place except for the time when a BO occurs which is well after you have a pink line drawn in.
increasing boundary = hold you are making money with the trend.
decreasing boundary = hold you are making money in the counter trend traverse of the TL-pink channel container.
PRV = knowing the forming bar is either increasing, decreasing going to be a peak or trough and what the pace will be for the forming bar. This is almost to much to learn in one post. Oh, you also know whether or not you will be having a VE (vloatility Extension of the left trend line which mens hold until the PRV of the next bar says to reverse..
Sooo with two variables some fifth grade friends on laptops with you and looking at price and volume you can just slay your parents with all the money you are making.
There's a lot of humor in this post; make sure you are seeing it instead of having a hissy fit because you think you are so smart and have nothing to learn.
Look up the compound interset and postage stamp formulas and get an Excell sheet out.
When you have peaking volume (PRV tells you as the bar forms) and you Fail To Traverse the channel, you are starting the overlap of the two channels: reverse you position at this point.
One thing that is nice about this stuff is that it works on ANY fractal in ANY market ANYwhere in the world.
Now you know why price only traders are beginners and why this kind of trading, to them, is unbelievable and astonishing. It is there and the market is always offering it.
Now you know why price only traders are beginners and why this kind of trading, to them, is unbelievable and astonishing. It is there and the market is always offering it. [/B][/QUOTE]
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Thanks cd
for taking that much of your time.
Anyway I guess you love teaching in one way or another.
Anyway - I still have a lot to read before I get the point (or rather the points).
Nonetheless it would be interesting to see this technique on lower time frames as charts.
BTW have you ever tested/traded it in the Forex market on any of the major pairs - daily or intraday??
Charly
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Thanks cd
for taking that much of your time.
Anyway I guess you love teaching in one way or another.
Anyway - I still have a lot to read before I get the point (or rather the points).
Nonetheless it would be interesting to see this technique on lower time frames as charts.
BTW have you ever tested/traded it in the Forex market on any of the major pairs - daily or intraday??
Charly
Obviously, seeing price in the "past" in your chart, the trends are obvious.
However, I only see a few trades that just by following price analysis I would have made money by looking at your chart. This is not to say that you are not making money in all of those trends.
What one hopes in trading, is if you are following a trend, it will continue far enough that you can justify the risk in the trade.
What I tend to look for is if price is respecting the trend lines. For example it does not break the trend line in a higher time frame. Then looking in a lower time frame, I try to get in sync with the price based on its location based on the channel. Then I use stop losses and profit targets to both prevent loss and book gains.
I hope you also understand that I don't trade with the overall trend always. For example price makes a double top or triple top near the high of an upward channel and does not break out to a higher high. For example see the EUR/USD. So we can sometimes go short even though overall trend is up since the price is respecting the resistance. Of course if resistance is broken strongly then you will get stopped out.
However, I only see a few trades that just by following price analysis I would have made money by looking at your chart. This is not to say that you are not making money in all of those trends.
What one hopes in trading, is if you are following a trend, it will continue far enough that you can justify the risk in the trade.
What I tend to look for is if price is respecting the trend lines. For example it does not break the trend line in a higher time frame. Then looking in a lower time frame, I try to get in sync with the price based on its location based on the channel. Then I use stop losses and profit targets to both prevent loss and book gains.
I hope you also understand that I don't trade with the overall trend always. For example price makes a double top or triple top near the high of an upward channel and does not break out to a higher high. For example see the EUR/USD. So we can sometimes go short even though overall trend is up since the price is respecting the resistance. Of course if resistance is broken strongly then you will get stopped out.
#####################################
Thanks cd
for taking that much of your time.
Anyway I guess you love teaching in one way or another.
Anyway - I still have a lot to read before I get the point (or rather the points).
Nonetheless it would be interesting to see this technique on lower time frames as charts.
BTW have you ever tested/traded it in the Forex market on any of the major pairs - daily or intraday??
Charly [/B][/QUOTE]
Forex pairs (the top six which have capacity and therefore liquidity), are like any other market with rules and human participants (direct or by robotic proxy) and so are the same as what was put up here for YM.
For extraction of what is offered, the requirement is to have a leading indicator of value and raw data to the extent that it is offered.
For example, smart money is the leading indicator of ES price. Forex leaders are obtained by having a cyber model of the forex of interest.
This provides a 20 to 30 second lead time minimum and usually a 2 to 3 mnute maximum lead time range.
As for the red box, yellow circle, pink LTL's and VE, etc., these are just degrees of freedom type data derived from raw data that is processed by using certainty throughout and not using probabilities.
There is never any time in data processing that certain data has to be made into uncertain data.
So as with any market, a person does not need to view price to be able to trade. Since the market rules and trading rules are crude, there is no real degree of fineness required in the mathematics used to maintain each of the degrees of freedom. By using sufficiency to have zero risk a minimum number of degrees of freedom for assuring certainty is all that is needed. This stuff is unchanging over fractals, seasons and the long term.
A person who is involved in design simply looks at the costs of participation (the premium) and then suspends the system on that boundary and takes all that is offered in excess of the premium. The premium is negligible by any rational financial standard. As seen by the eras that come and go, most people have never gotten to the design stage but settle for making money from doing deals as the primary function where creming capital is done to the extent tolerated.
As far as the forex is concerned, the template I use is wholly transferable and so are the systems. The results as judged by regular people who are successful falls into the unbelievable category when an expert at what I do approaches, with real money, in real time a given one of the top six pairs. Naturally, this live trading in real time is not a reliable measure (it was done just as a way to discuss things).
I mentioned making a million bucks a year with one non compounded contract; one response in another thread was: "manually, it is too labor intensive." I cannot imagine what it would be like for this guy to prune roses on his estate.
At some point I may be able to make the point that doing a simple repetitive thing in any market can make a person rich.
Yoohoo is only going to have to spent a short while (a couple of days) watching live trading to prove that SCT works,he has stated. So far he has not done this, he says here in ET. Why not? It seems quite simple to do if you ask the people who are doing what yoohoo wants to do. Each of them proved that SCT works.
I use paint to make the lines and circles and boxes. On Qcharts I use segments, cloning and rays, graphically and the alphanumeric system for particular points on the charts. I keep a supply of alphanumerics handy to clone and I project the segments and rays for price to come to when the future moves into the present.
I keep 3 to 5 trades ahead on the charts in terms of coordinates (price,time); it is considered calming to those with whom I live trade. since I deal with 70 degrees of freedom, I have to look around accassionally for informationto fill my data subset which I use to feed forward to analysis which is a different type of mental process.
My eyes move the way they wish and my MADA is automatic and instantaneous roughly speaking. Time in the usual sense can be compared to trading time. Trading time is very slow and passes slowly so slowly. Punching out MADA after MADA is very fast in this slow moving time. What happens most of the time is almost perfect repititions of exactly the same thing. One of my T&S's handles all trades the other handles 50 plus (on ES). They are hardly moving ever it seems to me. Over all the feeds on my screens there is usually only a 2 tic differential. I don't really care since I know that I will get fills (partial if required) at the better timed moment.
A volume substitute is required for Forex so I use three.