Hello to the OP…
A lot of good commenting has
already been done, but I would
like to add this important
afterthought:
The Challenge of a Trendline | Online Trading Academy
Enjoy xx
Excellent Read. I think one of the secrets in trend lines lies in the name itself, “Trend” lines. We often simplify the definition of trend to the formation of higher highs or lower lows. But this is only half the story. Trends are also defined by higher lows and lower highs. So confirmation of a trend occurs when both the upper and lower trend lines are running parallel or more commonly known as a channel. Trading channels is a very battle proven strategy. Our main problems are these false breakouts. I think this chart is a classic example.
Daren referenced this action to a major news event so armed with that knowledge we can ignore that price action when drawing our trend line. Now for a different view, what if we made a chart with jalapenoninja upper trend line and a lower trend line that ignored the last swing low as a false breakout as also reference by Daren to a major news event. It might look like this
Legitimate trend lines but are we trading a trend still. Please forgive my pattern recognition skills but I think they call this a wedge (someone correct me if I am wrong). So in fact we are trading a pattern not a trend. Although the concepts in trading a channel and patterns are the same there are differences in decisions you will have to make. As a channel trader you would be probably be looking for a different pair to trade. As a pattern trader you would be getting ready to go long on a breakout or short when the market finishes this correction phase.
The moral, its all a matter of perspective. That’s why is so important you understand your own personal style of trading and then trading what it is you see. Your perspective is the only perspective that counts.
Great post, bobbillbrowne!
Trade what you see. Great advice and I agree. You could give ten traders the same chart and all would see different opportunities whether long or short. Neither is right or wrong as it depends on the overall trading strategy.
However, back on topic - jalapenoninja’s trendline is what my trendline would look like so I would agree with his.