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Nov 16, 2007 - Technically, angled trendlines require more years of experience and thorough knowledge of the market to truly appreciate its profitable...
Many technical traders use chart patterns by means of angled trendlines while others use support and resistance trendlines to make their living at trading. While both are useful, they are different in nature. Floor traders are not equipped with charts like the average trader so they can only use price levels written down where the recent low or high is located. Off-the-floor traders are more equipped and create chart patterns drawing trendlines not only to find horizontal but also complicated angled trendlines. Which is more profitable or reliable: the horizontal or the angled trendline? To answer that question, we have to find how traders are using it and how many are using it. Chart patterns make up a small percentage of the trading community while the math-based indicators are used by the majority. Even if traders rely on indicators, support and resistance still rule supreme thanks to the floor traders. They cannot calculate indicator values on the fly to base their trading decisions; a simple yet straight-forward tool that defy even the best of the price thrusts.
Angled trendlines are less reliable compared to the horizontal trendlines. The main reason is obvious: clarity when view at first sight. Most human eyes can spot vertical and horizontal lines with accuracy than the inclined or declines lines.
Trading the trendlines can be difficult because they are counter-trend indicators. They act as support when the market is going down and resistance when prices are going up. Using them to tactically trade can be an art more than science. Understanding market action will help clear up the shady area of the market’s next move when resistance or support will hold. The useful advice is to learn to be patient and wait for the bounce, pullback or test (three different words with three different context with practically the same meaning, depending on what book you read or the person with who you speak) the trendlines. So how does one mark the different between a random trendline that may likely be a non-existent trendline to a possibly legitimate one? Using the parallel channel; that is, if the angle drawn from above or below from recent action, that can be used as a useful criteria that the second trendline might be a legitimate. Figure 2 shows the upper channel was made by drawing the two pivot highs. Once that’s completed, the second trendline is drawn based almost on the same angle as the first. In case of the horizontal line, simply review the charts from days to months earlier to locate where the previous reversal area where the horizontal lines played a crucial role and may influence again. Chances are if the horizontal trendlines have been traced in the past that caused the market to reverse they will be effective again when new prices go near them again. Technically, angled trendlines require more years of experience and thorough knowledge of the market to truly appreciate its profitable. Fortunately, horizontal lines don’t require as much artistic insight to figure out where the price congestions are located by quickly perusing the charts. Furthermore, horizontal trendlines appear more often and are more reliable since many veterans and floor traders use these simple techniques to pull profits from the market everyday. Discuss this article in the forum. ...thanks
for the trust you've shown in me and my business.
Disclaimer: Please note that charts and commentary provided by the moderator are for educational purposes only. Any trades placed upon reliance on the moderator’s charts or information is taken at your own risk for your own account. Past performance is no guarantee of future results. While there is great potential for reward trading stocks, futures and options, there is also substantial risk of loss and you must decide your own suitability to trade. Future trading results can never be guaranteed. This is not an offer to buy or sell stock, futures, options or commodity interests. Most trading systems are based on historical formulas which have worked in the past. However, what has happened before may or may not happen again. You can lose all your money trading stocks, futures, and options and you must decide your own suitability as to whether or not to trade. Only trade with true risk capital you can afford to lose. Only trade markets you can properly afford to trade. Properly funded trading accounts typically perform better than those that are not. Never risk more than 2-3% of your account on any one trade. Always define your risk before entering a trade and place a stop to limit your risk. There are no guarantees or certainties in trading. Trading involves hard work, risk, discipline and the ability to follow rules and trade through any tough periods during a system’s draw downs. If you are looking for a guarantee, trading is probably not for you. Most people lose money trading. One of the reasons is that they lack discipline and are unable to be consistent. A system can help you become consistent. Ironically, worrying about the monetary aspect of trading can contribute to and cause a trader to make trading errors. Therefore, it is important to only trade with true risk capital.
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