Support and resistance is rationalized by the idea that certain areas of high activity, being significant levels in people's positions, continue to be areas of high activity. But the justification to trendlines seems to me to be that the market reduces value at a linear rate, or at least, isn't supposed to cross this linear function. What is the rationale for a linear function being the limiting line on price action?
This may help: http://www.optimusfutures.com/tradeblog/archives/trend-channels-make-trading-decisions/
A trend moving up shows buyers that are getting more and more anxious to buy, therefore making higher lows. A trend line, looks pretty in the chart and makes for great eye candy for our mind which happens to be wired for identifying patterns.
CyJackX, You seem smarter than me. Read the posts by Spectre and let me know if you understand HIS rationale for labeling points on a trend line outliers. I didn't quite get it nor was I able to reach him for comment. https://www.elitetrader.com/et/threads/spectres-journal.250896/page-9 BobbyD
Before computers and electronic calculators, traders really learned Price structure, they understood the whys much more than now, you carried a charting book, graph paper, ruler, pencil and sharpener, ahh the good old days except for brokerage costs. Often times it was like Fibonacici, it worked cause many would do it/volume pushes the markets, but it is still true today, many people including myself use trendlines and we would not use them if they were not effective. We deal with price so there is no delay than like indicator based methods, plus risk is much less that those require price doing breakouts on momentum as that requires greater to greatest risk and many times more false signals. So you can see benefits of price either going to hold trendlines or push through and take small loss OR develop reversal entry to go other way cause trend failed or completed. Is it any better than moving averages? That depends on you knowledge of chart reading and back testing. Pure chartists will say nothing better, but there are skills of learning how to draw them and knowing they don't go forever. I have developed systems where only signals are trendlines and depending on timeframes, can have 50 trades plus a day on 23 hour instruments, most would disagree but there is skill needed on drawing them so you have less losses and being able to identify failures and ends of a swing(trend).
Rather than listen to fantasizing truck drivers posting from inside their econolines-- why not just face the truth that trendlines are meaningless marks on a chart. It's quite funny seeing the "confirmation bias" and "crowd wisdom" at work in this thread.
The markets are an ever-changing ...Ratio...of part art, part science And trend lines are just a small part of the overall picture in the science section to consider
Gold is worthless is you need water. Water is worthless if you need gold. Things work for many people and not for others. What i have found from a limited amount of study, most people use marks on a chart for one reason or another. To confirm an idea. Confirmation bias yes crowd wisdom yes. I suppose the ideas you seem to be putting down are making others money. You seem like the atheist that always talking about the devil.