Trendlines are universally used by almost all traders. They are a common place for all traders to
begin their technical analysis. The
problem is that a trader becomes too subjective in their trendline
drawing. Many traders will draw on
separate occasions two totally different trendlines based on the identical
information, depending on his inclination each time, thus consistency and
uniformity are totally lacking. Not all
trendlines are correct, in the end only one is. Throughout exhaustive research, it has arrived at an effective method to select the points essential to the proper
construction of a trendline. Once
learned and applied, trendline analysis is no longer subjective, it becomes
completely mechanical. Trendline
breakouts are precisely defined and price projections can easily be
calculated.
Supply and demand create price movement. Specifically, should supply exceed demand, price declines; conversely should demand exceed supply, price advances. This is the basic economic theory accepted by all traders that creates the market. In order to illustrate this we construct an ascending line to represent demand and a descending line to represent supply. The difficulty in constructing trendlines becomes apparent when choosing the specific points to select and connect creating the trend line. As in many aspects of trading, human nature tends to interfere greatly in the proper construction of trend lines.
One of the major errors traders posses when creating trendlines is
working from past to present, in other words working from left to right on the
chart in their construction of the trendline.
This is incorrect, for this reason alone; recent price activity is more
significant than historical price activity.
After all, the forex market is the most dynamic market in the world,
meaning it is changing all the time.
This approach will seem unorthodox to most trader at first, but in
actuality, this is the number one mistake that traders make when creating trendlines. We are accustomed from children
to read everything from left to right, correct?
When drawing trendlines we must learn to read like the Japanese do,
from right to left. Success in creating
trendlines requires both an attention to detail and a pattern of
consistency. Imprecision and disregard
for detail are the common practice in creating trendlines, which will result
in the construction of multiple trendlines forcing the trader to hope one of
the trendlines will correctly define the trend.
A suggested solution for the above is by having DeMark Trend Indicator. It is a very simple and powerful indicator, which draws two trend lines red and green. When the price breaks out one of them that is signal to enter. Plus, the indicator draws Take Profit too.
This indicator is most profitable the higher the time frame is. It works great on M15, however H1 is even more profitable, since it has less market noise.
Preffered pairs:
usd/jpy, gbp/usd, eur/usd, usd/chf, eur/jpy, gbp/chf.
~ PDF notes which will help you to better understand how to maximize your profits using DeMark Trend Indicator.
~ Special link for DeMark Trend Indicator free download.
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