Let me first declare my love for trendlinetrading, support and resistance. These essential tradingskills are being used every single day of my trendlinetrading life and have provided me numerousopportunities in trading. They also require me to takeyears to develop the skill be good and quick at drawingthem.
The support, resistance and trendlines plottedthrown together with the price chart will create a hugeamount of vital information waiting to be extracted fordetailed analysis. This requires lots of time and effort.At the same time, the analysis that is coming upcontains subjective elements.
In the long run, a trader will be able to identifyand plot these levels easily. In order to speed up thelearning process it is always good to compare theanalysis done to the analysis from software programssuch as Autochartist or any other charting softwareservice as a guide. This will greatly sharpen a trader’sobservation skills and techniques. The catch is to dothe analysis manually first before seeking automationservice from other sources.
• In an uptrend, we link the bottoms of swing low andTrendlines previous swing low together. We will sell the moment price breaks this trend line to theas an entry downside. In a similar fashion, this time in a downtrend scenario, we connect the tops of the trigger swing high and the previous swing high together. Now we will be taking a long trading position. • Trading on reject works in the logic that price will revert to its previous ranging environment and Trade on breakout is likely to be a wrong breakouts. A group of traders who particularly like this type of trading reject style are people who tend to fade breakout because they believe that 81% of all breakouts are false breakouts.
I have some tips for traders who wish todo it manually and develop that good ’eye’ as afoundation to trendline trading. In order todraw really reliable trendlines or horizontallines:
1. Work with market memory on the price chart- Meaning that a trader should work on a time frame where themarket memory is not too long or too short to plot histrendlines so that it is still relevant to the current market.2. Note the number of ‘contacts’ that a trendline is makingwith the price- More contacts makes the line more significant thus reflectingthat the price is giving more respect to the trendline that isbeing plotted. That means the trendline is most likely a majortrendline, support or resistance.
3. The spacing between contacts should have a healthy spacing- This indicates a more impactful trendline that is being plotted. 4. The proximity of the trendline, support or resistance to the current price-Is the current price far from the trendline or close to it?Whereby being closer might indicate that the trendline mighthave some effect on the current price near term.
These are just some pointers that I have observed andlearned from through the years which aids me in developingmy foundation in plotting trendlines, support and resistance.
Never rush to succeed the first few times if a traderdoesn’t get it. Practice makes perfect and with a goodfoundation in charting, I am sure whatever strategies appliedno matter how complex it might be, a trader’s market analysiswill never go horribly wrong.
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