Trading Divergence...Is this Trendline Correct?

Beginner Questions
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HH LH.jpg700×322 40.4 KB

A friend of mine draw this trend line and I didn’t think that it was a correct way of drawing lines to trade divergence. I had a hard time explaining to him why that wasn’t a valid trend line (HH). I’ve told him about the very small angle of the line and how many shadows this line touches (or in this case breaks) Yet He kept on telling me that there are no rules that say how many shadows need to be touched or broken, and how small or big the angle of the trend line should be…

Would you please tell me your opinion about this…If that line is a valid trend line or not ? And Why can we or can’t we use that in Trading Divergence, Regular Bearish Divergence…

Is there a criteria of How to draw Higher highs ? Is there a criteria of how the angle should be ?

I know that the uptrend is drawn by connecting Higher lows…But here I’m talking about Trend lines in Divergence Trading… We both read the chapter of trend lines from the school of Pipsology. Yet it didn’t seem enough somehow to settle this argument !

Thank you.

PS: The attached image is the exact same chart picture yet with a Scale one to one.

HH LH 2.jpg700×323 36 KB

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Can anyone answer my questions please ?

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Not easily, and not without almost writing a “book”.

And you should probably be a little wary if people try to, because it will only be personal opinion that you’re reading.

These things are very interpretative and far more subjective than most people realise. Many details are actually more or less user-defined.

But for what it’s worth, at first glance, the chart posted in your original post above does appear, to me, to display “bearish divergence”.

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Thanks Lexys.

It seems as a Bearish Divergence but I’d like to know what do you think about the way the line was drawn. Is there any criteria about the angle or the shadows touched or Broken ? Or is it a very subject matter and everyone has his own opinion about how to draw that line in order to spot the Bearish Divergence ?

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They seem to … (I say that as someone who rarely agrees with “where people draw the lines” according to the charts posted in forums).

To me, there’s no logic [I]at all[/I] in drawing lines across the top and bottom of candle bodies rather than from the ends of wicks, because opens and closes are subjective, user-defined and typically insignificant, whereas highs and lows are objective and factual and [U]highly[/U] significant.

For exactly the same reason, in my opinion bars are preferable to candles anyway. (Both display exactly the same information, of course - it’s only “where the visual emphasis lies” that’s different.)

1 Like
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Thank you Lexys.

I understand your point clearly. I think also that It doesn’t make sense to draw lines using the close and the open because they’re not objective…

Thanks again :slight_smile:

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Lines on a chart are far less important than understanding the context and reading underlying price action.

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Thanks FOREXunlimited.

That’s Right. Lines aren’t the important thing, understanding the context is what truly matters.

1 Like
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hi forexunlimited
I just randomly visit this thread and found your post. I am new to Forex so I am sorry if I ask silly question. what do you mean by “understanding the context”

thanks
ray

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Basicly it means knowing what moves the market, and as for price action that should speak for itself.

Grtz mate

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hi rlt
what moves the market are event, news, market sentiment, traders. is that what you mean?

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What do you think it means?
Trend lines are primarily used to mark of chart patterns. Patterns are just one way of identifying who is in control and what is likely to happen next. Patterns for thousands of times per day across all traded markets- but they’re not all created equal (Right?).

If they were, we’d all be rich.
So, why does a bullish breakout pattern fail? That’s just the way the market goes- everything is viewed through the lens of probabilities. You can skew the probabilities to your favor by understanding how the pattern formed, where, when, and why (context).