Maestro, Do you have the corresponding volume for this? It is somewhat more difficult to line up without volume considerations. I'll take a stab at it... Apparently, asking people to be serious is an issue...
This is theoretically speaking but can be interesting to discuss openly so as to try to develop a method of trading using trendlines. One could enter mid-bar, starting as a daytrade. You could try to use what would essentially be a 'zero-stop', meaning the price never looks back from your entry. There were many instances of this - great swing trades that started as great day trades.. dates that come to mind: 8-16-04, 10-25-04, 1-3-05. If you were savvy enough to see what was going on for each of those dates you could use a really tight stop and keep your risk:reward reallly small. Alternatively if you are a bit more patient with letting potential winners develop, you could use a time stop. One bar, two bars max. Find the largest range days, and figure out what percentage of your account would be at risk should you enter and the market moves against you for one or two of those days. Not fun like daytrading, not as leveraged, but it is much less risky, much easier on the soul - gives you time to prepare for the entry (and stop if necessary a day or two later). The exit or profit target could be determined by letting the trend develop and using the newly drawn trendline as a kind of 'trailing stop'. (alternatively you could use resistance as an exit or reverse - for instance if you went long late january 2005, you would try switching short at the big resistance line - the upper bound of the symmetrical wedge). This method could keep you long or short much of the time. There would be some whipsawing but the returns can certainly be large, should you have the discipline to stick to the system and not exit for some silly reason (such as: oh my trade is winning, i better get out!) Picking tops and bottoms with no rationale on the chart usually gets you burned (it certainly has burned me). Finally, as for those dates mentioned, there was strong evidence that a great trade was in the making. 8-16-04 - the friday before the nasdaq composite bounced off major support. 10-25-04 - the dow bounced off major support connecting the previous 2004 lows. 1-3-05 - the russell made a perfect rising wedge, volume went down the crapper over the holiday (assuming you ignored the fact that holiday volume is light) indicating weakness on the long side. the dow made a perfect rising wedge too connecting farther out highs and lows. on the short term the dow made a right triangle and had already broken to the downside on the last trading day of 2004. Funny, its easy to see in hindsight (why didn't I just short at resistance in 2005 on the NQ!!) - it's actually easy to see in realtime too - that upper bound of the symmetrical wedge covering early 2005 on the NQ was really easy to see as it developed in the first two trading weeks. Takes alot of experience, balls, whatever to actually place the trade and just hold, watching for new support/resistance to develop/break. As can be seen, it doesn't always work. Always use stops. Don't be biased. Market will do whatever it wants, with or without you. But when it does what you speculate it to do, if you are patient, the rewards will be large and much less stressful. (I will refer back to this post in the future to remind myself, lol).
Very helpful. But somewhat difficult to program into a definitive experiment. I would like to suggest a more formal approach (at least for now). Entry: On the close of the bar that is closed above (below) a trendline. Exit: None. only reverses to an opposite trade. Stop losses: None. We will keep a position till an opposite trend line is broken. Suggestions? Critique? Please advise, everyone.
These are trendlines that are common to most replies I received so far (through posts and PMs) Do we agree on them? Please post more pictures if you'd like to participate.
Maestro - I have seen many attempts at programing trendlines and other patterns. It does not work. I would much prefer a live test. I suggest that since we have had a few days up. We start monitoring. daily and 60 minute charts for up trendlines in liquid stocks with range. Lets draw in the trendlines and see what happens. OR right now we look for weekly down trendlines. Let us find them and create an action plan. I.E. we just hit a weekly down trendline. So we short either on a break thorugh a previous daily low or we sell a first hourly opening range breakdown. We look to make 2 atrs and we risk 2 atrs as long as we can see the exits being logical vis a vis recent highs and lows.
Why do you think that programming of the trend lines would not work? Could you explain please. Is it because of "fuzzy" rules?