Does Anyone Use Trend Lines To Signal Exit Points? And Can they be automated?

A

achilles28

Hey Everyone,

Ive just awoken to the utility of using trend lines as variable exit signals, as opposed to relying on strictly on candle formations.

Assuming one can accurately identify a trend, it appears violation of a trendline by a certain price threshold captures more of the move and leaves less on the table compared to other variable exit strategies.

Building on this concept, trend lines could be 'tightened' a bit after trade onset; after two seperate instances of trend test followed by confirmation, the trend line could be redrawn - usually at a steeper angle - thus preserving more profits in the event of a sharp pullback/reversal.

This seems really good at first look. Anyone else using this method to determine stops?

And can this be automated relativily easily? Im a novice programmer and still learning to trade in WEalthlab.

What should I be looking for or aware of?

Thanks ;)
 
Quote from achilles28:

Hey Everyone,

Ive just awoken to the utility of using trend lines as variable exit signals, as opposed to relying on strictly on candle formations.

Assuming one can accurately identify a trend, it appears violation of a trendline by a certain price threshold captures more of the move and leaves less on the table compared to other variable exit strategies.

Building on this concept, trend lines could be 'tightened' a bit after trade onset; after two seperate instances of trend test followed by confirmation, the trend line could be redrawn - usually at a steeper angle - thus preserving more profits in the event of a sharp pullback/reversal.

This seems really good at first look. Anyone else using this method to determine stops?

And can this be automated relativily easily? Im a novice programmer and still learning to trade in WEalthlab.

What should I be looking for or aware of?

Thanks ;)
More...

This is very interesting. I just started a recent thread that discusses a very similiar concept.
Are you trading futures or stocks?

http://www.elitetrader.com/vb/showthread.php?s=&threadid=57912
 
Quote from FuturesTrader71:

What time frame are you looking at for your trendlines?
More...

Depending upon market 'trendiness' at entry, I'll use the 2hr or 4hr for trendlines.
 
Quote from tradingbug:

This is very interesting. I just started a recent thread that discusses a very similiar concept.
Are you trading futures or stocks?

http://www.elitetrader.com/vb/showthread.php?s=&threadid=57912
More...

Cool. Thanks for the link.

I trade forex.

After combing the site for possible clues regarding trendline exit signals, it seems resident guru Grob/Hershey scorns trendline exit takers as 'morons' (right side only! ;). But its a step in the right direction nevertheless.

After reviewing your thread, there are some good ideas. I also noticed some allowance has to be given to accomodate the natural pullback tendancy after a strong trend is underway.

Do you follow grobs work? If so, what are your thoughts?
 
Quote from achilles28:

Depending upon market 'trendiness' at entry, I'll use the 2hr or 4hr for trendlines.
More...

You are definitely on the right track by using trendlines. You can built a whole methodology ( entries, stops and exits ,)using trendlines exclusively. You can also use trendlines to identify contractions and breakouts ahead of time .
Because you are using 2 and 4 hr charts for trendlines you are not a daytrader, but to be more accurate I would suggest 30 min trendlines or lesser. Play with it and you will see what I mean.

Basic trendlines can be automated but real time hand drawn trendlines are much more accurate if you really want to trade to and from them.
 
I use trendlines as a guide. They work well. I am having trouble coding trendlines into my trading program. Other things such as moving averages are easier to code and provide much the same information as a trendline. For example a 50 day moving average is often close to a 3 month trend line. I do not have good performance statistics about trendlines because they are hard for me to code into my programs.
 
I use AIQ systems trading software and they have "trendline break" alerts...all time frames. EOD and realtime. No programming needed.
 
Quote from achilles28:

Cool. Thanks for the link.

I trade forex.

After combing the site for possible clues regarding trendline exit signals, it seems resident guru Grob/Hershey scorns trendline exit takers as 'morons' (right side only! ;). But its a step in the right direction nevertheless.

After reviewing your thread, there are some good ideas. I also noticed some allowance has to be given to accomodate the natural pullback tendancy after a strong trend is underway.

Do you follow grobs work? If so, what are your thoughts?
More...


It is my perception that Grobs contributions are excellent. He has laid out a model for others to follow to become a wizard. My interpretation only.

I rarely exit on TL breaks. It is their primarily for protection. I mostly exit on the other side of the trend channel where the most profit is made.
 
Quote from Walther:

You are definitely on the right track by using trendlines. You can built a whole methodology ( entries, stops and exits ,)using trendlines exclusively. You can also use trendlines to identify contractions and breakouts ahead of time .
Because you are using 2 and 4 hr charts for trendlines you are not a daytrader, but to be more accurate I would suggest 30 min trendlines or lesser. Play with it and you will see what I mean.

Basic trendlines can be automated but real time hand drawn trendlines are much more accurate if you really want to trade to and from them.
More...

Great. I'm glad this thread is generating some interest.

Walther, thanks for your reply. My interest in trend lines is more limited to filters and exits as I've already designed a fairly reliable entry strategy (even though most contend entries are the least important system aspect). But if done in the right places, they can be quite, *ahem*, useful..

What interests me regarding your post is the predictive ability trendlines can have to spot breakouts and contractions ahead of time.

This is particularly useful for me as my strategy essentially trades 'breakouts' and mapping key areas that will likely produce future 'hotspots' represents a very possible and effective filter to build on.

Your comments also peak my curiosity because they seem to parallel much of grobs/hersheys work in the area of trendline prediction.

From my limited understanding of Grobs market theory, the confluence of long term, medium term and short term trend lines serve as ground zero for the next major directional movement.

The implications as a breakout/swing filter then become obvious. Which is the specific application Im toying with. That and exits.

As far as day trading. Sort of. When all my duckys line up, I trade off the 5 or 10 min chart. Real early entries. Then, if all my signals are saying its gonna trend, I bump up to a higher time frame to let my winners run ;)
 
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