Hi everyone! Just a quick introduction. I am newbie from London who finished school of pipsology about 2 weeks ago and now going over learned stuff, refining it an applying on practice.
I have a question on drawing Trendline.
For example - when I draw a trendline for a downtrend connecting lower swing highs do I need to update trendline if next swing high is higher than previous while price is still making lower lows? I’ll show you what I mean. Look at this GBP/USD 1 hour chart.
The question is: Do I need to update trendline by connecting first high with most recent lower high as price is stil is in a downtrend and is making lower lows. Like that
First, a trendline based on only two touches isn’t usually going to signify very much.
Secondly, when there’s just been a (relatively) enormous “thrust bar” like the one shown on your chart (of which the top is the first of your two touches), that’s not really a time to be drawing trendlines of that kind, including a “pre-drop high”, because something exceptional has just happened (maybe a market opening, a news announcement or whatever, but something “extraneous” to the typical TA situation, anyway).
I am sure many will disagree but I am not a fan of these trendlines, I believe you will find that horizontal lines at areas of support and resistance to be far more reliable. If you are looking for a way to follow the trend, try using a Simple moving average, here for example is AUDCAD 1hr chart with a 200 sma, see how price and the moving average are working together, pullbacks to the moving average also make for excellent entry signals
Thank you guys for your answers! It really means a lot for me.
It’s nice to see experience member to agree on something I was having a thought about. Even after spending only 1 month reading charts I have noticed that horizontal SnR lines are much more reliable that a trendline. I would assume because they are objective while there might be difference in how people choosing to draw a trendline.
Denis3450, thank you for mentioning 200 SMA. I did read about it last night and plotted it on my chart to find that it acts as very strong SnR level. I will definitely use it.
Lexys and PipMeHappy thank you a lot for your opinion on trendline and horizontal SnR levels.
… have noticed that horizontal SnR lines are much more reliable than a trendline!! Then when should you enter or exit? and how do you determine the price direction?
Price direction is determine buy trend of the simple moving average as I showed in post #3, if your sma is moving up and price is riding on top of it then you know you have a good uptrend, same for a downtrend except you want price to be riding below the sma. Entries and exits are a personal choice but ideally in an uptrend you want to buy on pullback to support, support could be the sma or a previous price point. A reversal candle ( pin bar, engulfing ) at support will validate your entry, taking profits again is a personal choice, if I have multiple lots then I might close all or part depending on price action signals I see when hitting overhead resistance,
That depends, a little, on the charting methods we choose, to display it, strictly speaking? But if we use bars or candles (not everyone does), then it moves [I][U]vertically[/U][/I] within each bar, which is why from [I][U]horizontal[/U][/I] trendlines some people can most easily see when it’s “crossed a line”. And many pips to you, Victor … [I]many[/I] pips!
Yes; I take this point, certainly. Good to see a line chart.
(That’s why I mentioned that not everyone uses bars or candles, but I’d think it’s probably fair to guess that 99% of this forum’s users do).
I use constant-volume bars, myself (I trade futures), so the prices move vertically within each bar.
I don’t suggest that diagonal trendlines have no significance, only that - like several other posters on the previous page - I find horizontal ones [I]far[/I] more significant and reliable, myself.
