What is the rationale behind trendlines?

[Mtrader]

I guess some have to be reminded that ummm moving averages ... move. Trend lines don't.

That's why we call them moving averages.
Do the test: calculate today 250 times the 10MA on a daily chart. The result will not move but will be exactly the same 250 times. So the MA is not always moving.

If you draw enough trend lines you have no need to make them moving. You just skip to another one.

 

[userque]

 

[CyJackX]

I don't get what's so logically difficult to understand behind why trend lines show a pattern.

Trend lines show a pattern? I thought patterns show trendlines.

It is not limiting.....therefore there is no rationale

Sure, "limiting" may have been poor word choice. Perhaps "significant" may be better. Support/Resistance are not "limiting" but are "significant." I'm just wondering what the logical rationale is for trendlines, if there is any besides self-fulfilling prophecy.

i.e. the thesis for support/resistance is that high volume areas continue to be areas of high activity for so-and-so reasons.

so, for trendlines:
local maxima/minima will remain under a linear function because _______________ until ________________?

I'm not asking for a black and white answer, because I know those don't exist in the markets. But, like, support/resistance, they are supported by SOME (proven or unproven) rationale.

It's simple enough to say that a downtrend will continue going down...but I'm wondering where a LINE, a linear function of y = mx+b comes into the equation. If I had to spitball it'd be something like the ratio of selling pressure to buying pressure is constant or does not cross a threshold over a certain period of time, but that seems too rigid to believe.

And which local maxima/minima qualify is in the eye of the beholder, whether it is informed by experience or emotion.
If a trendline is broken, was it:
A. Wrong/Poorly placed?
B. A correct signal of a change in trend?

A trendline on a higher timeframe does function quite similarly to a moving average.

 

[clacy]

Trendlines are nothing more than a tool to help you interpret price action and trends.

 

[CyJackX]

Trendlines are nothing more than a tool to help you interpret price action and trends.

:-/

An empty statement, as that is what every technique under the sun is meant to do, and something presupposed before the question.

Astrology could be a tool for price action analysis, but nobody would use it because we all know the stars have no significance to price action, and it would be a bad tool.

We use trendiness because we attribute significance to diagonal placements of maxima/minima, and I'd like to know what rationale there is besides "it just works until it doesn't.". What makes it a "better" tool?

 

[clacy]

:-/

An empty statement, as that is what every technique under the sun is meant to do, and something presupposed before the question.

Astrology could be a tool for price action analysis, but nobody would use it because we all know the stars have no significance to price action, and it would be a bad tool.

We use trendiness because we attribute significance to diagonal placements of maxima/minima, and I'd like to know what rationale there is besides "it just works until it doesn't.". What makes it a "better" tool?

I'm not advocating that it is a "better" tool. Those are your words not mine. Like anything in trading..... ie lines, pivot points, indicators, etc, they are tools and there's nothing magic about them.

The "magic" comes from a trader's ability to handle their emotions, money management and the way they use their tools to interpret how to proceed.

 

[userque]

The original question is overly vague. If I were to ask, "What is the rationale behind the Moon?" Would you really know what I'm actually asking?

Contrast asking, "What is the rationale behind the belief that the Moon is made of cheese?" This question is much less vague. It makes more clear what I'm actually wanting to know.

It answers the "Rationale with respect to what?" question.

Here's another vague question, for example: "What is the rationale behind line charts?"

 

[CyJackX]

I'd rationalize that someone would use line charts over candlesticks if they found the candlesticks too noisy and preferred to evaluate only the closes.

Even if the initial prompt is vague, I feel the question of "What, if anything, justifies local maxima/minima following a linear slope?" has added some specificity.

 

[userque]

I'd rationalize that someone would use line charts over candlesticks if they found the candlesticks too noisy and preferred to evaluate only the closes.

Right. That's one of many possible answers I could have been 'looking for.'

Even if the initial prompt is vague, I feel the question of "What, if anything, justifies local maxima/minima following a linear slope?" has added some specificity.

Yes, that is more specific.

The markets are a complex adaptive system whose factors are fully unknown, or fully unknowable.

Some could shout, "Self-fulfilling Prophecy!" But that raises the question: then why doesn't it always work? Etc. Etc.

In other words, I don't know. And I think the real answer is unknown, or unknowable.

 

[i960]

Even if the initial prompt is vague, I feel the question of "What, if anything, justifies local maxima/minima following a linear slope?" has added some specificity.

You're approaching this looking for absolute answers which you're not going to find. If you have a problem with the lack of guaranteed absolutes then I don't know what to tell you other then you should recognize that a rigid mindset is going to be an impediment in your trading.