Do trendlines work?

[BBB]

Well here is something that may make you laugh or cry: Either way I'd appreciate your feed back - I don't care if you're a newbie or George Soros.

TREND LINES ARE POINTLESS!

My point is this - draw a trend line in any market, then go to the same market in a different charting package. Is the trend line still valid? Probably not because the calibration of points will be different.

Is it any wonder so many people have trouble making money in the markets when newbies are told nonsense such as entering a trade when price corrects to the trendline as a basic trade set up?

Why is most material focused on trade set up anyway? I'd say entry to a trade is about 20% (if that) of what determines whether the trade will be successful or not. How you manage risk is far more important.

Anyway, all comments about my trendline hypothesis are welcome - detractors included! (my hide is thick - I can take it!)

 

[neil]

Grail for sale

TREND LINES ARE POINTLESS!

Wrong - there are at least two points required to draw a trendline.

Jeez - you can tell I am bored.

 

[ChartMan]

Trend lines are pointlesss
OK I'll take the bait. How long do you have? I have proven ( historically) time and again, that you can get out wihin a couple of points on a top or bottom on the dow by drawing trendlines. Who cares that the line may be a bit out? What is important ,is the imformation that is contained within the boundaries of the lines, not it's actual slope, length or whether it touches highs or closes.

 

[ChartMan]

BBB

What you say is very true, and concurs with my experiences. An exception may be a totally 100% mechanical system, but even then, mere mortals still have to press the button AND get a fill.
Does it work for you, in the timescale that you are comfortable trading with? Only yourself can determine the answer to that question.

 

[BBB]

Trend Lines/Fake Lines

ChartMan:

How about this then-

How can you statistically prove you can get within a couple of points of a trendline when the trend line is NOT REAL! A trendline is something YOU create - not the market. The 'market' doesn't even know its there!

As for the Dow, well I don't think any method that works on one market alone is really reliable. I firmly believe that when one has became competent in reading a chart (i.e. understanding the crowd psychology), one can take those principals and skills to ANY market.

If you want to make money from the 'information contained between' then maybe Bollinger Bands are the answer. You can't deny that they represent 2 standard deviation from the average. Where the bands lie is FACT, the trendline that is drawn is a manifestation and can be WILDLY out on different charting packages.

As for a 'few points', well my friend, how much are a 'few points' worth in the full size S&P futures? Enough to keep the average family in food for a month!

Thanks for taking the bate! Its only my opinion and thoughts.

What do others think?

Yours

the DETRACTORRRRRR

 

[neil]

Who cares - it works for me, and others no doubt. I'd rather take the cash than try and convince you or anyone else of the "truth" of a method.

As someone pointed out on another thread - it is "you" and when you press the button that makes a winner or loser - not the method, trendline, gann line, Bollinger Bands, or astrology.

Use a coin if you wish - just manage the trade.

Stick to simplicity and trade or stop trading and join a debating club. I make no apology for being harsh. ( Not Rude)

So whatever method,trend line etc etc you use, it matters not. try some - one will suit you, it will not suit another - thats why your "opinion"on trendlines is worthless, except to you; since there is not right or wrong answer. What you consider invalid someone else will trade profitably.

There aint no grail.

It's simple - if one view of trendlines was correct we would all follow it from our beach side pads in Cornwall.

 

[Salty Gibbon]

Neil, you're absolutely right.

 

[BBB]

Yep - thats why I stated it's only my opinion. Just something that others may or may not have thought about before.

Something that some may think is utter tosh or may not.

I just thought it may be worth pointing out my OPINION as so many people seem to take as gospel anything that is written in a book.

If all these books and common ideas worked, then why do so many people give up trading with out success?

Why do market makers know what the daily stochastic indicators are reading? Is it because they trade from them? Because they know that if it is OB or OS there will be bundles of retail orders there. That means they know they can fade these orders by gapping the market at the open, triggering the stops, then running the market against the gap - closing their positions as the day traders try to join in by fading the gap. I used to love doing this when I was a local. I've never read about this in any book though. Have you? This only comes with experience.

Sure the stochastic will give correct signals once in a while if taken in the right context- but so will flipping a coin - as you rightly say. Its managing the trade that counts.

Sorry, I've gone off on one. You're right though, if it works for YOU then good!

 

[a320]

I've never read about this in any book though. Have you ?

It is mentioned in at least two books I have read
Granted they are extremely specialist..... but the info is always there if one looks




a320

 

[Newtron Bomb]

Hi BBB

Hope you and everyone else is keeping well

I just thought it may be worth pointing out my OPINION as so many people seem to take as gospel anything that is written in a book.

If all these books and common ideas worked, then why do so many people give up trading with out success?

I think that so many people fail due to lack of financial & business planning. This is a business and like all businesses they need cash flow, business plans, accounting, research and development in one form or another relevant to our profession.

How many traders new or old can say that they treat trading as a business?
How many of you that are nodding and saying "i do" actually do it and not just think you treat it like a business?

Beyond this another big reason imo would be not having the metal ability to control emotions when trading

How can you statistically prove you can get within a couple of points of a trendline when the trend line is NOT REAL! A trendline is something YOU create - not the market. The 'market' doesn't even know its there!

I dont think Chartman or anyone can prove a trend line statistic as you as for but i can vouch for his uncanny ability to say a turn will happen at say 9878 on the dow when the price will be quite a lot away from the target he has given. I have seen him do this more than once in real time in the chat room and in real time posted on the BB.

If you dont believe it go through the threads or the summaries that i do. You will see times and charts that have been unedited with such remarks that speak for themselves and go some way to providing the statistics that you request.

And to add further weight to this have a look at his dow competition entries they have over time been accurate

Sure the stochastic will give correct signals once in a while if taken in the right context- but so will flipping a coin - as you rightly say. Its managing the trade that counts.

I actually agree with the coin flipping analogy and was slated for it some time ago, however certain conditions can bee added like money management and in the long run you should come out on top. Just an opinion controversial as it is


While people seem to be having a little rant i think i would like to add how petty some of the discussions on these BB's have been of late as if no-one has anything better to do than to pick arguments with folks we have never met.

Also i feel a little left out as ther is nothing better than dusting the old half brick for a bruise up....
so....
For a princely sum of £425 not refundable i will come around to your house to show you how to make a good cuppa for stress free trading. I may also show you how i trade and plunder the markets from futures to forex.

Have a good day all
Newtron Bomb

 

[Newtron Bomb]

...Just popping the halk brick in the sock waiting for someone to bite!!! lol

 

[BBB]

lol...

I rekon chartman is using realtime data - you lot are using delayed data - thats why he has this uncanny ability to call turning points (joke).

You're totally right about treating trading as a business.

 

[Newtron Bomb]

LOL

mark 3 crystal ball more like

 

[neil]

Seer

LOL

mark 3 crystal ball more like

Something of the night about him

 

[FTSE Beater]

Why do market makers know what the daily stochastic indicators are reading? Is it because they trade from them? Because they know that if it is OB or OS there will be bundles of retail orders there.

Hi BBB

I'm sorry, but I don't believe that for a second. At any one time, stochastics can give both OB and OS signals, (depending on the settings), so how would a market maker know which way to go?
The answer is they can see where all the orders are, where there building up, and therefore the place where there is enough retail traders to close their position without too much trouble.

I personally believe trendlines work - if nothing else they give you a "Get out now, you got it wrong" point when they break the wrong way.

All IMVHO

 

[gmca686]

BBB,
You said that trend lines are not real, but created by the user. This is not correct when the trend line is a "linear regression" All the data points go into the calculation of the regression line, which is a trend line. If you add parallel lines at one or two standard deviations from the regression line, you end up with the ability to predict, to a reasonble level of statistical accuracy, when the trend is broken.
However, for this to be useful a trend needs to be there in the first place.
regards

 

[bonsai]

Trend lines are a bit like No 8 buses ?

They dont always stop at your bus stop ?

 

[ChartMan]

Excellent point, GMCA . I went off on one once, using linear regression- they were extremely good at indicating reversals and acted like a huge magnet.
BBB - just atke a look at the characteristics of the 3 peak ND top on the DOW.Simply take the first two points and extend the line that it makes. When the price touches the line, sell. This is a proven exit strategy taht works time and again, not only for me, but for many others. It also frequently happens to be within a couple of points of the actual top. Watching 1 min ES vol and the bar, one can take the actual top. Remember we're not talking a couple of points on ES- that's almost 20 points on the DOW.
Actually, I don't care whether it works on other markets, it works on the DOW adn that is all I'm interested in. You're right, the trendline is manufactured to suit, and as such is not real, but does that matter?
They work for me, they may not work for you.

 

[Grey1]

GMSA,

Quote " This is not correct when the trend line is a "linear regression" All the data points go into the calculation of the regression line, which is a trend line. If you add parallel lines at one or two standard deviations from the regression line, you end up with the ability to predict, to a reasonble level of statistical accuracy, when the trend is broken. "

Not correct.. One can't assume the trend is broken ... You can only assume the price has exceeded 2SD.. This is also true for Bollinger and sigma bands..

if you really want to know when the trend has changed you must bring VWAP into your analysis because VWAP Line carries Volume info where as linear regression does not..

Volume can't be faked.. price can

Sorry being negative all the time..

 

[JonnyT]

Sorry but volume can be faked in the UK.

JonnyT