Trendlines I
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Trendlines, when drawn right are very effective tools.
Before I get started with them, let me say there are right ways and wrong ways to draw a TL, but if one draws it one way, and the other another way, it does not make one way the wrong way. Yet, if neither produces the results it is suppose to, then neither are right. I'll show the first way, then go into a series of diatribes concerning it, and then my favorite way. Yet, it is amazing both ways create practically the same results.
BTW, I am a 100% technical forecaster, so love taking a chart and using it as a crystal ball to peer into the future. I need to be able to see the future. After all a good or bad trade is depended on it.
Also, I do not subscribe to cliches like "The trend is your friend". I'm long on the GBP/USD right now, and it is against the trend, and I'm about to pick up 100 pips on it.
Okay, enough of all that, I can get off into a tangent quickly, but then I love all this. I joke with my wife, my trading is a close 2nd in my life....to Tucker.
Trendlines are used by Elliot Wave masters as wave counts in the trend. I'll show in an eventual post how the last UP was a perfect 5-wave count, and how it bounced off the upper TL, which is not posted here.
Notice on the chart the recent action. The TL was broken through. Also notice it was, by comparison a large candle that took it out. That is the nature of a TL breakout.
Next question: Why am I long? Serving as a confluence of other indicators and a particular event that is the nature of a TL breakout is why I went long. You have a breakout, and then an eventual correction that corrects back to the TL or at least close to it. That is the point to go short. That is what I am waiting on. As a confluence, the tenken is near the TL, so that is also going to be formidable R for a low risk short down to 1.5840. (Save that comment somewhere just in case you doubt me.)
So TL's:
1. Break is a long candle.
2. A corrective process is necessary back, at least close to it.
3. Afterward, the trend officializes.
Stops:
Once the TL is broken, the recent peak is a good point.
Once it gets back in the DOWN at circa 1.6122, that becomes the new peak, which makes it the new stop.
In other words, hit it just right, and you can have a stop at breakeven just hours or even minutes into your trade.
What that also does is free up space to look for another trade.
Targets:
This depends on your indicators and past events. There is chart support at 1.5841, which is also the top of the cloud and the previous kijun.
Measuring the nature of the DOWN will also have a strong determination where it will go, so adjustments may be necessary.