Trand Line Break

Discussion in 'Index Futures' started by ContangoJoe, Jun 19, 2009.

  1. The best run of winning days in a row I have had has been with the Trend Line Break (TLB) method (7 day without a losing trade, -a few break-even trades). But that was followed by a not so stellar run the next week.

    I have learned much about the TLB system but I feel that there are still a few missing things (e.g. my not so good week).

    The main rules I follow:
    1) The trendline needs at least 3 points of contact,
    2) The price needs to look like it is following a somewhat linear trajectory,
    3) The trend line needs to have formed over a statistically significant amount of time.

    That last one is a little up in the air. I know that less than 20 minutes is not so good and that half a day or more is much better.

    I like to enter with a double lot size and exit the first lot after only 2 points of profit. I then use a stop loss that is one point above/below the pivot. This gives me a low risk trade (usually break even +/-), assuming I get my 2 point exit.

    The remaining lot should be taken at not less than 4-6 points profit, depending on the volatility that day.

    I know the stuff about how "fractal" the market is and that this method should work on any time frame; but
    I think that the lower time frames have more noise and will be less successful.

    The possible outcomes of a TLB are 1) flatten out and consolidate, 2) It was just a little noise and will resume the trend, and 3) It is a true trend reversal.

    Using volume or sector indexes like the SOX might help spot the non-reversals.

    Your thoughts are much appreciated!:)