TA - Trends & Trend Lines

[GreatPig]

I thought I'd start the first real TA topic on trends and trend lines. If the trend really is your friend (at least rising trends), then I guess it helps to be able to recognise your friend when you see him. Or, perhaps more importantly, to notice quickly when he deserts you.

Now I realise there are 101 different indicators to help you decide when a trend is starting and ending, but for the purposes of this discussion, I really only want to focus on trend lines.

So a few general questions:

• Do you use them?
  
• Do you find it easy or difficult to place them?
  
• What if the ideal line is intersected somewhere in the middle by one or two price bars? Do you ignore them or adjust your line?
  
• How much of a break through a significant trend line would you need to generate a buy/sell signal - or at least to make you look more closely at your other indicators?

I've included a couple of charts (the second one in the next message) where I've drawn some trend lines on a couple of stocks. The first one below is for Allied Leisure Industries (ALL).

Some questions about this chart:

• Do you think the trend lines I've placed are good, bad, or reasonable? If not good, why not?
  
• What would you have done at the point marked 'A'? The trend crosses at $3.76 while the lowest close just after that is at $3.65.
  
• If you wouldn't have sold immediately, do you think you would have continued to hold at least as far as point 'B'? That's just over a month.
  
• At the point marked 'C', the price bar (or candle here) dips through the trend line by about 4 cents. Apart from that, the line touches quite nicely at the two ends and also the point just down a bit from 'C'. Would you just accept this price bar dipping through the line or try and move the trend line somehow?

<continued in next message>

 

[GreatPig]

TA - Trends & Trend Lines (continued)

This second chart is for BHP Billington and shows a rising trend from about April this year until the current time.

Some questions about this chart:

• Is the trend line well placed or not?
  
• What about the price bar (candle) breaking through at 'A'? It dips below the line by about 6 cents.
  
• And the big question: what would you do at 'B', which is actually the current time (assuming you'd bought somewhere low in the trend)? The trend line cuts through at $12.74 and Friday's close was at $12.64 with a low of $12.60.

So trends and trend lines are the topic of this discussion. While I've posed some questions about a couple of charts I've found, feel free to discuss the topic in any way you wish and post your own examples.

Cheers,
GP

 

[still_in_school]

Hi GreatPig,

personally i enjoy the use of trend lines, dont find them to difficult, but i do prefer to draw trendlines on candlesticks, depending on the stock, or even if they are options, the use of a line graph, personally i find is easier, due to just wanting to know end of day close.

for a break in buy or sell price, i like to look for reversal patterns that have some sort of confirmation from a particular candlestick pattern, some bullish/bearish indicators that i like... are gaps and engulfing pattern... the use of different indicators such as MACD, RSI &amp; ATR (sometimes EMA) it all helps, but the less indicators can sometimes do you better...

Cheers,
sis

ps... will comment soon on your chart, but overall it looks really great, though i ll point out some little indicators that show some earlier signal of the stock reversing in either an up or downtrend direction

 

[still_in_school]

Hi GP,

added a few candlestick indicators to you chart... but candle patterns... i love em'

Cheers,
sis

 

[GreatPig]

sis,

Thanks for the response.

some sort of confirmation from a particular candlestick pattern

I'm not yet familiar with all those candlestick patterns - the ones with names that sound like Tai Chi moves . I will get around to reading some books on candlestick charting eventually though.

For the BHP stock, I had it in my paper portfolio but dumped it today. That may be premature, but I think I prefer somewhat cheaper stocks anyway.

Cheers,
GP

 

[still_in_school]

Hi GP,

give it time, but once you can read candlesticks, it gives you a greater/deeper view of the market, but the candles are like telling you a story.... and helps give a much clearer indication/predicition of how the share will act in the very near future...

here some good reading material about candlesticks

The Secret of Candle Stick Charting - Louise Bedford
Candlestick Charting Explained - Gregory Morris

Cheers,
sis

 

[GreatPig]

For the BHP stock, I had it in my paper portfolio but dumped it today. That may be premature

Yes, well....

GP

 

[Joe Blow]

Great thread guys... very informative.

I'm enjoying these TA topics!

 

[JetDollars]

GreatPig,

Good one mate, learning stuff from you here.

Great posts.

 

[RichKid]

Why do I not see any of the images for the charts mentioned in this thread?!! Is anyone else having the same trouble? I can see all the charts in other threads. Maybe something happenned during the changeover to new forum software. (I am logged in).
RichKid

 

[GreatPig]

RichKid,

Yes, unfortunately all the attachments were lost when the forum moved to the vBulletin software. I put a few of my ones back in, but not all these ones.

I don't seem to have the ALL one any more, but here's the BHP one.

Cheers,
GP

 

[GreatPig]

And here's what subsequently happened, although the trend line has been moved down from the original position. The red arrow marks where the "B" spot was on the original.

GP

 

[RichKid]

Hi GP,

Thanks very much for posting the charts again. If I could I would post some myself but eitherway you look like you've done it as I would have (keeping in mind that I'm a beginner). I would probably have added some more lines closer to the higher support level for the midpart of the upswing and maybe some downtrend lines and support lines when prices start to change. You'll be amazed at the shapes and little trends that you see appear.

I'm restricted to basic line charts when I draw lines because of the charting software but I'd go with candles or OHLC (preferably). Main thing for me is to be ready to exit when it crashes through a longterm support line (eg with Hardman HDR- I'm currently watching it (see other thread) and it still hasn't regained the earlier support, needs to get to $2.12).

Finally but most importantly, I've heard it said that drawing trend lines properly is an art (TA is not an exact science or we'd all be rich) so keep practising and follow your trading plan.

Good Trading to you!
RichKid

 

[madmacs]

yes Rich kid its a bit dissapointing without the chart
as I too would like to contribute to this TA Thread..

 

[madmacs]

Re: TA - Trends & Trend Lines..oops

My apologies
I had only seen the first page of the thread...

and not the repeated charts..

cheers

 

[RichKid]

Makes a huge difference doesn't it (a picture/chart)?! Wish I had a way of posting some, but I'll keep looking.
Thanks GP for starting this thread. I've been looking at some of Louise Bedfords books, she actually shows you how to draw them (lines), but again it's very basic and each chart will be different- hence my reference to knowing where to draw trendlines being an art form.
RichKid

 

[Wysiwyg]

Greetings all from beginner to experienced. I see most people believe trading with the trend to be one of, if not the most, profitable trading/investing practice. My mental block is the time frame that a trend is believed to be a trend. Obviously in between tick & yearly range there are many trend directions so the identification of trend for trading purposes is not the least advantaged in my experience.

Secondly a trend of whatever time frame can end at any given moment. Meaning the highest price has been reached and the issue has began a trend change. This is the unknown factor and hence we hope for continuation. For mine, "trading with the trend" is a "more probable" strategy as the "probability" of price continuing in the same direction is uhhh, higher. No firm guarantees but maybe better than a random entry.

 

[motorway]

My mental block is the time frame that a trend is believed to be a trend. Obviously in between tick & yearly range there are many trend directions so the identification of trend for trading purposes is not the least advantaged in my experience.

I do not see how a time frame advantageously
defines a trend..

Either a Trend exists or not

Objectively defined

XAO



Motorway

 

[tech/a]

Greetings all from beginner to experienced. I see most people believe trading with the trend to be one of, if not the most, profitable trading/investing practice. My mental block is the time frame that a trend is believed to be a trend. Obviously in between tick & yearly range there are many trend directions so the identification of trend for trading purposes is not the least advantaged in my experience.

Secondly a trend of whatever time frame can end at any given moment. Meaning the highest price has been reached and the issue has began a trend change. This is the unknown factor and hence we hope for continuation. For mine, "trading with the trend" is a "more probable" strategy as the "probability" of price continuing in the same direction is uhhh, higher. No firm guarantees but maybe better than a random entry.

Tell me

How do you profit in a trade without catching a trend (Regardless of time frame)
2 points are a trend.

 

[Wysiwyg]

Either a Trend exists or not

Objectively defined

XAO



Motorway

A trend can be objectively defined with historical prices but what is the trend now? On the chart you show the completed (hindsight) trends within the whole chart and I would agree the trend is up for the whole chart period.
In the future trend traders would be hoping for a continuation but is the probability really greater than 50/50 using the same starting point on the chart?