Quote from Osman:
Great post. for the questions put forth
1. Does anything (drawing tendlines in this specific case) have to be done the same way by everyone to make that item (trendlines provide support or resistance) provide quality information?
No, but the more people draw it the same way the more you have self-fulfilling prophecies playing out.
There is an interesting aspect of investing and trading to consider. I feel that there is many important truths and precepts about markets. It serves a person well to know and use these. With regard to participants and the sway that they hold, the outstnding consideration is that the minority rules.
The concept that the minority rules is a difficult factor to continually handle to "win" while making money. It seems to contradict so many things that we are tught or learn elsewhere outside of markets and trading. You will "see" some other thoughts along these lines below.
2. Is there ever any possibility that trendlines ever show support or resistance?
When looking back in hindsight, trendlines do seem to show support or resistance (a trick of the eye?) but when trading live i would not depend on them.
The short answer is NO. This is where, apparently,a lot of people can't "get with it" to learn to make money and to be efficient in their approaches. What follows is not something that many will "get".
I speak of trendlines as "right" lines of channels. They are to the right of the price bars within any channel. All persons proceeding to expertise get to a place where they attain a neutral bias for thinking in order to be most "efficient". That is recognize all money making opportunities without favoring one type of trend over another. This is past the trap of "edges trading", etc.
Once a person recognized that trend line are on the right side of trends and the channel that contains the price movement, they also get to see trend lines, relative to all upper and lower price limit are "inside" and always "away" from the upper and lower limits. Usually the limits are called "resistance" and "support", respectively. When a person "grows" to trade using trends, he gets very used to and consistent in drawing channels. He sees trendlines are on the right side of all trends. As he trades a long trend. the channel left and right boundaries move increasingly upward. What side of the channel arives at the top of the limits of the price range first? NOT THE TRENDLINE SIDE. The trend ends before the trendline ever reaches the top of R. What hits R first is the "left" side of the channel. Then price forms a flat top pennant (as the most extreme possibility) as more and more of the channel is used. The point of the flat top pennant is where, if at all the trendline meets the top of R.
So a person has to, over time, grow to learn that the trend line is not a construct that is ever used to define R or S.
The best way to define R or S in the context of channels and trends is the limit that is reached when a price traverse from right to left on a channel fails. If a full traverse is made, then it is very very likely that on the following left to right traverse, the trend will continue. It continues on renewed volume as the nextright to left traverse ensues.
Trends in channels, when they end, they end on R or S as they fail to continue their money making traverse all well before a trendline is in the picture.
The second paragraph discusses "direction" "strengths" of trends.
3. How does a trend line show the strength of a trend? If it didn't what does?
If the price action hits the trendline and bounces back towards the direction the trendline points to, that can be interpreted as the trend having strength.
For making money, there are important characteristics to consider. Trend characteristics serve to protect traders of all skill levels. When it comes to defining the especially pertinent characteristics of "strength", the trendline does not show up in the picture as a singular factor.
It is extremely important for a novice to give rapt and complete attention to what matters and not get into any nuance type stuff. Stay away from attention grabbing wild goose stuff.
Momentum analysis is great at showing trend strength
4. How does a trendline show a trend strength is "lessening"?
The price action hits and passes through the trend line repeatedly. Either the trend strength is lessening or the trendline itself was not constructed properly and needs to be readjusted.
It doesn't.
5. How does a trendline show a trend strength is "changing"?
Hard to answer, its easier to use chart formations/patterns + momentum analysis to see trend strenght 'changing' than with trendlines.
It doesn't.
6. How does a trendline show a trend strength is "reversing"?
Price action breaks the trendline and stays below it, topping (or bottoming) out.
By now you "get" the picture that "strength" is a casual word dbphoenix uses to cover his perception of "trends". This is a cavalier mess it turns out. It urns out that trends do not "reverse" on trend lines. Trend lines are generally accepted as lines drawn on the right side of channels that contain trends.
color=red]As a person "grows", he has several major steps to climb up to get to expertise. Each step is a hard won experience that is "earned". "Earning" stuff occurs as payments in time are made. You do not "earn" with "failure" payments. you earn after failure by debriefing and thoroughly coming to provisional understandings of the alternatives to failure that you create. A while back I suggested making 100 copy sets of many days of 5 min charts. A master set of 100 copies of a series of days, each one on a separate sheet, is a resourse for debriefing. You can make copies of the master set many many times.
One of the learning steps is channels. Once you have drawn all the channels on a set of 100 copies foe a series of 10 to 20 days (more than an IT period), you will find that you are consistent and you do not have a "mess' on your hands as does dbphoenix.
the most important single thing you "earn" is "knowing" that you can "believe" in channels. This earned belief is, in fact, a descrete stand alone complete precept that you "trust". You actually have laid aside the consideration of whether or not channels "work". Channels do work. Channels make money as the job they do to work.
This is a Be Do Have thing. Life is not done as: Get a tutu. Learn to dance. Be a ballerina.
When you sit and look at a stage and see ballerinas performing, all of them went through Be Do Have and not Have Do Be.
Balerinas are born. They Be.
Channels BE. channels work, you see. Get it. Just get it.
You begin with yourself for everything there is. You ARE it.
By doing repeatedly, thoughtfully, incessantly. You get to DO.
At some point, your DOing displaces all the crap you have as baggage from wherever. You get to HAVING. You move to a place where the precept you BE is DONE enough that you HAVE it as a truth, belief and whay you trust. You HAVE it.
What you are going to experience soon is that you can draw at the beginning of a trend, a channel. It will be something you draw right away ASAP and it is correct. You will see the channel "filled". As time passes the channel is made use of by the price.
This is not the silly stuff of going back after all has happened and drawing in some dumb lines all over the place.
One of the neat clues that comes up for you is the "new point 3".
Every channel that you draw for any of the market paces, begins with the first traverse of the channel from right to left. Then it goes to the other side (left to right). This is when and where you arrive at "new point 3". You now can draw the "trend line" through points 1 and 3. Point 2 at the end of the first narrow travrse is the point where the "left" channel line is drawn parallel to the "trend line" (the "right" channel line).[/color]
