Develop A Good Eye For Trendline Trading

Let me first declare my love for trendline trading, support and resistance. These essential trading skills are being used every single day of my trendline trading life and have provided me numerous opportunities in trading. They also require me to take years to develop the skill be good and quick at drawing them.

Important Analysis Through Trendline Trading

The support, resistance and trendlines plotted thrown together with the price chart will create a huge amount of vital information waiting to be extracted for detailed analysis. This requires lots of time and effort. At the same time, the analysis that is coming up contains subjective elements.

In the long run, a trader will be able to identify and plot these levels easily. In order to speed up the learning process it is always good to compare the analysis done to the analysis from software programs such as Autochartist or any other charting software service as a guide. This will greatly sharpen a trader’s observation skills and techniques. The catch is to do the analysis manually first before seeking automation service from other sources.

Concepts of Trendline Trading

Two Concepts of Trendline Trading:• In an uptrend, we link the bottoms of swing low and previous swing low together. We will sell the moment price breaks this trend line to the downside. In a similar fashion, this time in a downtrend scenario, we connect the tops of the swing high and the previous swing high together. Now we will be taking a long trading position.

Trendlines as an entry

trigger• Trading on reject works in the logic that price

will revert to its previous ranging environment and breakout is likely to be a wrong breakouts. A group of traders who particularly like this type of trading style are people who tend to fade breakout because they believe that 81% of all breakouts are false breakouts.

Trade on reject

I have some tips for traders who wish to do it manually and develop that good ’eye’ as a foundation to trendline trading. In order to draw really reliable trendlines or horizontal lines:

1. Work with market memory on the price chart

2. Note the number of ‘contacts’ that a trendline is making with the price

- Meaning that a trader should work on a time frame where the market memory is not too long or too short to plot his trendlines so that it is still relevant to the current market.

- More contacts makes the line more significant thus reflecting that the price is giving more respect to the trendline that is being plotted. That means the trendline is most likely a major trendline, support or resistance.

3. The spacing between contacts should have a healthy spacing

4. The proximity of the trendline, support or resistance to the current price

- This indicates a more impactful trendline that is being plotted.

-Is the current price far from the trendline or close to it? Whereby being closer might indicate that the trendline might have some effect on the current price near term.

These are just some pointers that I have observed and learned from through the years which aids me in developing my foundation in plotting trendlines, support and resistance.

Perfect Trendline Trading with Practice

Never rush to succeed the first few times if a trader doesn’t get it. Practice makes perfect and with a good foundation in charting, I am sure whatever strategies applied no matter how complex it might be, a trader’s market analysis will never go horribly wrong.

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