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'I'm not a fan of trend lines'


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I just read an astonishing thing from one of Reuters' technical analysts.  He was interpreting GBD vs USD and come out with the following: 'I am not a great fan of trend lines but ...'

Now, I was under the impression that the trend line was one of the fundamentals of TA.  But now it appears that there are professional analysts who 'aren't fans' of it.

Have you ever heard anything like this before from a professional technical analyst?

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7 minutes ago, dmedin said:

I just read an astonishing thing from one of Reuters' technical analysts.  He was interpreting GBD vs USD and come out with the following: 'I am not a great fan of trend lines but ...'

Now, I was under the impression that the trend line was one of the fundamentals of TA.  But now it appears that there are professional analysts who 'aren't fans' of it.

Have you ever heard anything like this before from a professional technical analyst?

yes, loads of times, not a great fan myself. They are never as strong as horizontal lines, they usually need to be re-drawn on a daily basis, by the time you have 3+ touches everyone can see them and the big players are looking at setting traps and they don't hold their drawing accuracy well through the different time frames on any platform.

 

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16 minutes ago, Trevbeats said:

I have always heard Trend is your friend and it dose work for me but with caution. If we can't rely on trend lines whats the next point of call?

 

I wouldn't call myself a 'fan' of any one bit of TA but I try to find the use in all of them.  Drawing of trend lines seems to be fundamental but apparently you can be a professional technical analyst and not like them.  You still have to respect them though.

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6 minutes ago, Trevbeats said:

I have always heard Trend is your friend and it dose work for me but with caution. If we can't rely on trend lines whats the next point of call?

the trend is your friend til the bend at the end, but a trendline is different, it's usually asking too much which is why they need to be constantly re-drawn, that and the lack of accuracy on different time frames mean they are very problematic to use for setting limit orders to.

I wouldn't say never use them because sometimes they are obviously the popular method of choice for that particular instrument at that particular time but check alternatives as they might be a better fit such as horizontal S/Rs or dynamic S/R such as a particular MA. 

 

image.png.4b52fdbe7da146887a646887f23ccd8c.png

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1 hour ago, elle said:

The Destiny of every trend line is to be broken ......................

Capture trend line.PNG

 

 

Yes ... but you can say the same thing for everything in TA.  Every resistance and support line will be broken at some point, everything is true until it isn't ... following that logic our technical analyst who isn't a fan of trend lines because they keep being broken would have to say that he isn't fond of anything in TA :D

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1 hour ago, Caseynotes said:

the trend is your friend til the bend at the end, but a trendline is different, it's usually asking too much which is why they need to be constantly re-drawn, that and the lack of accuracy on different time frames mean they are very problematic to use for setting limit orders to.

I wouldn't say never use them because sometimes they are obviously the popular method of choice for that particular instrument at that particular time but check alternatives as they might be a better fit such as horizontal S/Rs or dynamic S/R such as a particular MA. 

 

image.png.4b52fdbe7da146887a646887f23ccd8c.png

 

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30 minutes ago, Trevbeats said:

Hi Casey,

I have never looked at horizontal S/Rs or dynamic S/R before? HOw does this work? I do use MA

The key is to consider where is price likely to find pending buy or sell orders on the chart, they could be unfilled orders from the last time price visited and/or new orders placed there because that was a level that buyers found sellers and vice versa in the past and so possibly will again. That's why price moving up the chart is suddenly halted at resistance, because there is a cluster of sell orders waiting there, they are clustered because sellers want to work together to have the best chance of turning price and it doesn't matter what time frame chart the sellers are looking at the support and resistance levels are obvious on all.

So static S/R is based on where real orders are most likely to be placed in the market, that's what makes them such a powerful tool.

MAs can work as dynamic support for a trend and so can be used to find entry points for joining the trend on dips back to the MA, the key there is to find if/which MA that is being used by the large traders so some trial fitting is required first to find a match, the 20 sma and 50 sma are commonly  used for this approach.

 

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@dmedin, it is not surprising to me that some, maybe many, professional traders and/or analysts don't like or use trend lines.  There are many techniques out there, which is why the idea of the self fulfilling prophesy doesn't hold water and also the reason said techniques can work, because if everyone was using the same techniques and using them in the same way then everyone would see the same things and the market would be perfect (i.e. always at the "right" price), which it patently is not.

In terms of trend lines themselves, they are merely a way for chartists to visualise the price action.  They do need to be evolved with price action, as has been mentioned above, and the do need multiple (min 3) touches and bounces away to be valid (chartist rule).  However they are often not reliable for trading decision as the final move in a wave may not reach the line or may penetrate and recover within the line in a more volatile market.  The time frame is also important, especially for that latter situation as, for example, on a weekly chart price could spend the while week below or above a trend line but it it returns back to the other side of the line within the week the line will still be valid.  This is even more problematic when you consider there is often not much difference between a weekly chart and monthly chart trend line...

For this reason some analysts, including me, will use other techniques such as Ichimoku or Bollinger bands overlaid on trend lines.  In addition some use moving averages of various sorts to do the same thing.  This all works only when the scenario suits (i.e. some of the above are only useful for trend following and not for swing turn identification.  For me it is about gaining experience using the techniques in concert and with other techniques and fundamentals and picking the ones that suit you best.

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Used in isolation yes.  The idea is to use them in conjunction with a number of other devices to create scenarios and so long as price action conforms to the expectations of your scenarios you go with it.  As soon as price does something unexpected you reassess, maybe exit maybe not.  If you draw the lines wrong, prematurely, or within the wrong fundamentals premise then sure they will be unreliable.  If you get them right they are very good trade entry indicators, especially, as others have said already, when the channel/trend line is broken.  In the end, as also said before, the trend is always doomed to failure.  This is why trend following outside the wave 3 is fraught with danger.  This is also why swing traders seek signals of a trend change much earlier than a major trend break.

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  • 2 weeks later...
On ‎29‎/‎07‎/‎2019 at 11:49, elle said:

The Destiny of every trend line is to be broken ......................

Capture trend line.PNG

when considering trend lines - I don't see them as the  exact point of price support / resistance. My view is, if I can see them I'm sure the "Big Boyz" can as well. I look at "wriggle room zones" around them. here's the $AUDUSD  one of the pairs that has reclaimed that January low

Capture tl.PNG

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