Trend line break method

P

parttimetrader

I'm experimenting with a system based on trading breaks of 30 minute trend lines currently on the NQ. It seems to work pretty well but i haven't managed to do any back testing on it yet. (Please see the attached chart )

Trade entry is based on price crossing over the 30 minute trend line ( starting from pre-market 5.30am ET so i have a couple of bars before the open ). I wait until the open of a bar is over the trend line. Then i watch the TICK and wait for a strong reading either to the up or down side depending on the trend line that was broken. Usually a reading above 400 seems good.

Other indicators on the chart are RSI and a 10 period SMA from hourly time series. I find the RSI on the 5 minute chart is useful to spot divergence & often the 10 period SMA acts quite accurately shows hourly S/R levels.

I try to place exit a point under/above the last swing low/high. sometimes this can be a bit far though so i need to find better strategy. I will also use trend breaks to close a position, but because i have to wait for the next 30 minute bar i need some other exit method also.

I'm just wondering if anyone has managed to back test such a system? Any thoughts on how my entry and exit could be improved much appreciated.

TIA
 
Trend line breaks are a bit tricky, because when an uptrend line breaks it doesn't mean that you should just go short. The market sometimes will fall off a cliff, sometimes go into a trading range, or sometimes break that trendline but go on up at a lower slope.

It's easy to choose the right ones in hindsight, impossible in real time.

It's another confirmation tool, but as a stand alone method - watch out.
 
Since there are so many false breaks of Trendlines ( 1 or 2 ticks), in my experience it is best to wait for a solid break of the Trendline and then enter on a throwback to it.
 
Quote from prox:

Trend line breaks are a bit tricky, because when an uptrend line breaks it doesn't mean that you should just go short. The market sometimes will fall off a cliff, sometimes go into a trading range, or sometimes break that trendline but go on up at a lower slope.

It's easy to choose the right ones in hindsight, impossible in real time.

It's another confirmation tool, but as a stand alone method - watch out.
More...

Yes knowing which breaks will reverse and which will go sideways is tricky. It usually helps by also looking at volume & or the TICK indicator at the time of a break to see if it's for real or not.
 
Quote from ddog:

Since there are so many false breaks of Trendlines ( 1 or 2 ticks), in my experience it is best to wait for a solid break of the Trendline and then enter on a throwback to it.
More...

So once the trend line is brokon you'd wait for bounce back to that trend line before entering a position?
 
Quote from parttimetrader:

...It usually helps by also looking at volume & or the TICK indicator at the time of a break to see if it's for real or not.
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Hi parttimetrader,

Exactly what do you mean by looking at the volume or the TICK indicator at the time of a trendline break?

Edited In...I just re-read your original post and your looking for confirmation via a 400 Tick reading.

How long have you been experimenting with this trend line break method?

NihabaAshi
 
Quote from NihabaAshi:

Hi parttimetrader,

Exactly what do you mean by looking at the volume or the TICK indicator at the time of a trendline break?

Edited In...I just re-read your original post and your looking for confirmation via a 400 Tick reading.

How long have you been experimenting with this trend line break method?

NihabaAshi
More...

I'm thinking if i see a spike in the TICK & volume volume is strong then the trend line break is more likely to be for real.

I've been experimenting with this idea for a few weeks now.
 
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