Trends and Trend Lines

Copyright © 2008 Albert Yang. http://www.priceactionforex.
com All Rights Reserved
Trends and Trendlines
by
Albert Yang
Page 1 of 39
http://www.priceactionforex.com
This ebook may not be copied, sold or redistributed without prior written permission.
Copyright © 2008 Albert Yang. http://www.priceactionforex.com All Rights Reserved
Copyright Notice
All contents copyright © 2008 by Albert Yang. All rights reserved. No

part of this document or the related files may be reproduced or
transmitted in any form, by any means (electronic, photocopying,
recording, or otherwise) without the prior written permission of the
author.
Page 2 of 39
Legal
Limit of Liability and Disclaimer of Warranty: The author has

used his best efforts in preparing this book, and the information
provided herein is provided "as is." The author makes no
representation or warranties with respect to the accuracy or
completeness of the contents of this book and specifically disclaims
any implied warranties of merchantability or fitness for any particular
purpose and shall in no event be liable for any loss of profit or any
other commercial damage, including but not limited to special,
incidental, consequential, or other damages.
Trademarks: This book identifies product names and services known

to be trademarks, registered trademarks, or service marks of their
respective holders. They are used throughout this book in an editorial
fashion only. In addition, terms suspected of being trademarks,
registered trademarks, or service marks have been appropriately
capitalized, although the author cannot attest to the accuracy of this
information. Use of a term in this book should not be regarded as
affecting the validity of any trademark, registered trademark, or
service mark. The author is not associated with any product or vendor
mentioned in this book.
Page 3 of 39
High Risk Investment Warning
Trading in any financial market involves risk. This ebook, the

website www.priceactionforex.com and its contents are not intended
to be and shall be deemed not to constitute either a solicitation, or an
offer to transact in any financial market. The contents of this ebook
are for general information purposes only. The term "contents" as
used herein shall be deemed to include the contents of the ebook, the
contents of the website www.priceactionforex.com and any email
correspondence or newsletters related to the website).
Trading foreign exchange carries a high level of risk, and may not
be suitable for all investors. Before deciding to trade foreign exchange
you should carefully consider your investment objectives, level of
experience, and risk appetite. The possibility exists that you could
sustain a loss of some or all of your initial investment and therefore
you should not invest money that you cannot afford to lose. You
should be aware of all the risks associated with foreign exchange
trading, and seek advice from an independent financial advisor if you
have any doubts.
No one was compensated for their testimonial in connection with
this ebook. Further, testimonials are not indicative of future
performance or success. Unique experiences and past performances
do not guarantee future results! Testimonials disclosed in the ebook
are not intended to be representative of all clients; certain accounts
may have worse performance than those indicated in any testimonial
or other illustrative example. Trading stocks, options and spot
currencies involves substantial risk and there is always the potential
for loss. Your trading results may vary. Because the risk factor is high
in the foreign exchange market trading, only genuine "risk" funds
should be used in such trading. If you do not have the extra capital
that you can afford to lose, you should not trade in the foreign
exchange market. No "safe" trading system has ever been devised,
and no one can guarantee profits or freedom from loss.
The content on this website is subject to change at any time
without notice, and is provided for the sole purpose of assisting
traders to make independent investment decisions. Although every
Page 4 of 39
attempt has been made to assure accuracy, we are not providing any
express or implied warranty as to the accuracy of the content. We do
not accept any liability for error or omission. Examples are provided
for illustrative purposes only and should not be construed as
investment advice or strategy.
No representation is being made that any account or trader will or
is likely to achieve profits or loses similar to those disclosed in the
ebook. Past performance is not indicative of future results.
By purchasing the ebook, subscribing to our mailing list or using
the website you will be deemed to have accepted these terms in full.
Price Action Forex, www.priceactionforex.com, Albert Yang, the
website, ebook, and their employees, officers, directors, shareholders
and representatives are not intending to either provide investment
advice or invite customers to engage in investments through this
ebook.
We do our best to insure that the website is available 24 hours per
day but we shall not be responsible for any damage or loss of any third
party if for any reason the site is not available at any particular time,
or at all.
The information provided on this ebook is not intended for
distribution to, or use by any person or entity in any jurisdiction or
country where such distribution or use would be contrary to law or
regulation or which would subject us to any registration requirements
within such jurisdiction or country.
Hypothetical performance results have many inherent limitations,
some of which are mentioned below. No representation is being made
that any account will or is likely to achieve profits or losses similar to
those shown. In fact, there are frequently sharp differences between
hypothetical performance results and actual results subsequently
achieved by any particular trading program.
One of the limitations of hypothetical performance results is that
they are generally prepared with the benefit of hindsight. In addition,
hypothetical trading does not involve financial risk and no
hypothetical trading record can completely account for the impact of
financial risk in actual trading.
For example the ability to withstand losses or to adhere to a
particular trading program in spite of the trading losses are material
points, which can also adversely affect trading results. There are
Page 5 of 39
numerous other factors related to the market in general or to the

implementation of any specific trading program which cannot be fully
accounted for in the preparation of hypothetical performance results
and all of which can adversely affect actual trading results.
We reserve the right to change these terms and conditions
without notice. The content of www.priceactionforex.com and this
ebook are copyright and may not be copied or reproduced.
No parts of the ebook or any of its components may be resold.
They are for individual use only and may not be passed on in any
form.
Affiliated sites, linked sites and advertisements

This website expects its partners, advertisers and affiliates to
respect the privacy of our users. Be aware, however, that third parties,
including our partners, advertisers, affiliates and other content
providers accessible through our site, may have their own privacy and
data collection policies and practices. For example, during your visit to
our site you might click a link to, or view as part of a frame, page,
certain content that is actually created or hosted by a third party. Also,
through this website you may be introduced to, or be able to access,
information, Web sites, features offered by other parties. We do not
accept any liability for any actions or policies of any such third parties.
You should check the applicable privacy policies of those third parties
when providing information on a feature or page operated by a third
party.
While on our site, our advertisers, promotional partners or other
third parties may use cookies or other technology to attempt to
identify some of your preferences or retrieve information about you.
For example, some of our advertising is served by third parties and
may include cookies that enable the advertiser to determine whether
you have seen a particular advertisement before. Other features
available on our site may offer services operated by third parties and
may use cookies or other technology to gather information. We do not
control the use of this technology by third parties or the resulting
information, and we do not accept responsibility for any actions or
policies of such third parties.
You should also be aware that if you voluntarily disclose
personally identifiable Information on message boards or in chat
Page 6 of 39
areas, that information can be viewed publicly and can be collected

and used by third parties without our knowledge and may result in
unsolicited messages from other individuals or third parties. Such
activities are beyond our control and we do not accept any liability for
any consequences resulting from any such activities.
Page 7 of 39
Sharing this Document
A lot of work that went into putting this document together. I can't tell
you how many countless hours were spent putting together the
information. That means that this information has value, and your
friends, neighbors, and co-workers may want to share it.
The information in this document is copyrighted. I would ask that you

do not share this information with others-you purchased this book,
and you have a right to use it as you see fit. Another person who has
not purchased this book does not have that right. It is the sales of this
valuable information that makes it possible for me to continue to write
and sell ebooks at a cheap price. If enough people disregard that
simple economic fact, future ebooks will be at ridiculous prices,
assuming there are future ebooks at all.
If your friends think this information is valuable enough to ask you for
it, they should think it is valuable enough to purchase on their own.
After all, the price is low enough that just about anyone should be able
to afford it. If you can’t afford this book, you shouldn’t be trading,
simple as that!
It should go without saying that you cannot post this document or the
information it contains on any electronic bulletin board, website, ftp
site, newsgroup, discussion board, forum, bbs or any sharing items
like bittorrent, emule, edonkey etc. The only place from which this
document should be available is the website
http://www.priceactionforex.com.
Page 8 of 39
Table of Contents
Copyright Notice ......................................................................................................2

Legal.............................................................................................................................3
High Risk Investment Warning ..........................................................................4
Sharing this Document .........................................................................................8
Table of Contents.....................................................................................................9
Introduction and Forward by the Author .....................................................10
Forex .......................................................................................................................... 11
Base Theory of Price ............................................................................................12
Reading a Price Chart ..........................................................................................13
Opens and Closes..................................................................................................14
Price Fractal Theory..............................................................................................15
Slope Theory ...........................................................................................................16
Definition of a Trend.............................................................................................17
Price Trendline Definition ...................................................................................18
Obvious Trends, Trendlines for Obvious Trends ........................................34
Unanswered Questions........................................................................................37
FGA’s (Frequently Given Answers) .................................................................38
Conclusion ................................................................................................................39
Page 9 of 39
Introduction and Forward by the Author
Thank you for buying this ebook.
This is an ebook that will introduce you to trends and trendlines

unlike any other presentation before. Please do not let the terse
content fool you; you should never judge a book by its cover, nor
should you just an ebook by its byte-size. A lot can be said for brevity,
I have thought through most of this, and have distilled it down to its
fundamentals. This book will help those who are trend traders, and
every other type of trader out there.
It has been my frustration that so many books talk about “trend

trading” yet never define a trend. I liken it to the Infinity car
commercials when they first came out, they advertise a car but never
showed the car. I use to give the authors the benefit of the doubt,
perhaps they had some sort of goal, for us to understand and discover
what a “trend” is on our own. Perhaps it is the thousands of hours I
have poured over their books; or the email conversations with quite a
number of them that I have become a cynic, in deep belief that they
don’t share it because they don’t know it! Next time you meet a
trader who tells you to give them your hard earned money so they can
trade for you, ask them to define a trend, and watch them pontificate
on this and that, not giving you a straight answer because they
themselves do not know.
You might not agree with the contents of this book, but I assure
you there are very few books (as of this writing, I know of none) that
even makes a digestible attempt at not only defining a trend, but
giving you a mathematical basis in which to draw trendlines, and a
good deal of confidence in the trendline you draw. I hope you enjoy
reading this book as much as I enjoyed writing it.
Page 10 of 39
Forex
I have written this for the Forex (Foreign Exchange) market, but
the information contained herein is not exclusive to Forex.
Everything I cover in this book is applicable to every market. In fact,
I will go ahead and admit something that most of you will find
ridiculous. Because I am a 100% technical analyst, I actually don’t
care if I am trading EUR/USD, corn, gold, pork bellies, Microsoft stock,
or anything else. It is the chart that I look at, and nothing else.
Most of the time, I trade without even knowing what underlining item
I’m looking at. This reduces my bias, and makes me a 100%
technical analyst.
I have tested all of this with stocks, bonds, futures, and of course
Forex. So this is applicable to any and all underlining items. But
please understand that as with the warnings I posted above, if you
have no clue, what you are doing, then you should not be trading,
regardless of instrument. Forex offers demo accounts and I highly
recommend trading with them until such time your skills and
judgment have reached the realm of profitability.
Page 11 of 39
Base Theory of Price
Regardless if you agree with the current price or not, regardless if

you feel the market is efficient or not, the price currently is what you
can buy or sell at, take it or leave it. That means then, current price
discounts EVERYTHING. If you say your BMW is worth $60,000, but
the only price people are offering is $20,000, then the sad reality of
the fact is that your car is worth $20,000. This is what I coin “Price
Reality Theory”. This is why I personally do not believe in
fundamental analysis. Yes, the Buffetologists will not scoff at me,
and tell me how wrong I am. But when all is said and done, even
Warren Buffet, when he buys, has to buy AT CURRENT PRICE.
If you cannot accept this fact to be true, then I highly recommend

you stop reading now. Inside trading aside, this is the basis of the
rest of this book.
Assuming you can accept what I just wrote above, let’s move on
to the application of this theory.
Page 12 of 39
Reading a Price Chart
A basic price chart should then be read from right to left, not left
to right. Reading left to right gives weight and priority to the past.
Reading right to left gives priority and weight to the current price.
If that is the case, then it stands to reason that ANY indicators

based on moving average, gives weight to past prices, and simple MA
gives equal weight to past prices as does current prices, therefore,
any indicator based on MA is not a reliable source of information.
One other important part of note, in any price chart, depending on

how far we zoom in or out, we are not guaranteed how far back the
chart goes, but we are always guaranteed on a live chart, that the
current price is available.
Page 13 of 39
Opens and Closes
Given that price bars are a snapshot of a price in a block of time,

if a price bar is offset, then more than likely, the highs and lows will
remain the same; but the open and close values will change. Given
this to be true, then open and close values are untrustworthy
indicators. Given that local highest highs and local lowest lows will
probably remain the same for quite a few bars, you can then see why
Donchian created Donchian Channels. His theory and mine are the
same; that local highs and local lows will remain fairly consistent in a
given timeframe, but opens and closes will not. So therefore, open
and close values will not be used in the evaluation of price.
That said, it also proves that this theory is held by Tom Demark,
who thus created the definition of local highs and local lows. Any
offset in charting of the bars, will not alter neither DC’s nor TD’s. And
while DC’s have no lag, TD’s technically have no lag, but require 2
more bars for confirmation.
So of all the price information available to us; current price, and

previous highest high, and previous lowest low will be the only items
used in determining market trendlines.
A higher timeframe is nothing more than a bunch of bars from

lower timeframes smashed together. Therefore, the highest high
and lowest low will remain, but the opens and closes will be useless.
Page 14 of 39
Price Fractal Theory
Because price charts are fractal in nature, it stands to reason that

any definition given for slope and trend direction or trend bias, should
be relative, and not absolute. That means, any definition should be
given based on the bars available for the chart that is currently viewed,
and that the definition should change as the views are zoomed in or
zoomed out.
It is quite possible for 2 people; one to say the EURUSD is

trending up, and the 2nd person to say it is trending down, and for both
to be correct; if both are view different timeframes, or different
“zoom’ness” in terms of the chart.
This requirement might sound strange at first, but if a math model

is to follow the price only, it must then be fractal in nature also.
Page 15 of 39
Slope Theory
This is where we get into the math.
Given slope as defined by y=mx+b
Then, an upward trend HAS TO HAVE slope > 0.
Corollary:
A downward trend HAS TO HAVE slope < 0
The two statements above, HAVE TO BE TRUE by

mathematical definition.
Only 2 points are needed to determine a slope. Because we

believe that current price discounts everything, current bar’s high and
low then will always be used as one of the end points. The other
endpoint then will be the absolute high and absolute low on the chart,
thus giving us 2 points in which to base our trendline drawings.
(Remember, price is fractal, especially with respect to charts showing
past price, so the other end point will depend purely on how zoomed
in or zoomed out you are on the chart.)
Page 16 of 39
Definition of a Trend
Because a trend is defined as that which has a slope that is

non-zero; we can then write the most simple of definitions for a trend.
Uptrend ~ An uptrend is when the price makes higher highs, and

higher lows.
Downtrend ~ A downtrend is when the price makes lower highs

and lower lows.
We know this definition to be correct because without the higher

high, a slope will never be > 0, and without a lower low, we know that
a slope will never be < 0.
An uptrend then, leaves a set of higher lows in its wake,

thus giving us support lines.
A downtrend leaves us a set of lower highs in its wake,

thus giving us a resistance line.
Page 17 of 39
Price Trendline Definition
If the current price discounts everything, then it is one of the end

points.
l If a trendline is to be drawn, it is to be drawn from historical

data, to current data. This is because trend is established in
the past, and we assume is carried into the present.
l If a trendline is to be drawn, by definition of slope, an uptrend

must have one end point at the lowest low point in the graph.
Otherwise, an upward slope is impossible.
l If a trendline is to be drawn, by definition of slope, a

downtrend must have one end point at the highest high point
in the graph. Otherwise, an upward slope is impossible.
No “correct” trendline which is drawn up to the current price,

can cross a price between the two points used to draw the line.
If a price bar is already crossed by the time it gets to the current

price point, how can it then be considered a “trend”?? This is worth
reading a few times, and highlighting with a marker. This is the
mathematical crux of drawing a correct trendline.
Because a trend is defined as slope, we have to then assume that

the correct trendline is the slopeline drawn in which is defined as:
The least steep line in which links a highest high or

lowest low to the current price point, without
crossing any bars between the two points.
Page 18 of 39
More importantly, it is the line which connects the highest

high, to the current high of the current bar, and the lowest low
to the low of the current bar without bisecting any bars in
between.
Because we do not deal with opens and closes, this definition

above, yields us the same line, even if there’s a shift in time.
Given this definition then, the only correct way to draw a trendline is:
For downtrends, to take the point of highest absolute high price

on the graph, to the highest point on the current bar. If drawing such
line bisects any of the bars in between the two points, then the
contact end point (on the current price side) needs to be regressed
(moved to the left) until such time that such is false.
Page 19 of 39
Example:
Here, point A is the highest high in the graph, and B is the high of
the current price bar. The highest high in the graph is drawn to the
high of the current bar, note that it crosses through a few bars,
therefore violating the definition of a trend. We leave point A where
it is, and regress point B back to the point such that:
Page 20 of 39
Trendline A-> B does not cross through any bars. When we do this,
then the correct trendline looks like this:
Page 21 of 39
Another example. Given line C-D.
There are bars that are being bisected between line C-D, therefore, D
needs to be regressed to a low in which no bars are bisected between
line C-D.
The results look like this.
Given current price, and highest high on the chart (point A) and
lowest low on the chart (point C), these are then the ONLY correct
trendlines you can draw for this screenshot. Remember that prices
are fractal, and thus you can only talk in terms of what you see on the
chart, thus meaning that altering the zoom’ness of the chart will alter
your trading, which is true and should remain true.
Page 22 of 39
I will give more examples, and go into more details about them.
This will be the chart we will be working with in our example.
Let us first identify, the highest high, and lowest low on this chart.
I have marked them as “A” and “X” respectively.
Let us then draw a line, from A to the high of the current bar, and
a line from X to the low of the current bar. You will note that with all
my charts, there are only highs and lows, no opens and closes.
Page 23 of 39
Note that the line going from A to the high of the current bar,
bisects a few bars. Note also the line from X to the low of the current
bar, also bisects a few bars.
I have highlighted the bars which have been bisected in red

boxes.
Because this violates the definition of a trend, we will leave the

anchor point A, but move the other anchor point, from the high of the
current bar, to the highs of previous bars, until such a point, that A to
endpoint crosses no bars. I shall do this for you in successive
screenshots. While A remains the same anchor point, I will move the
other end point back, to highs of each bar, until such time, our
condition is met.
Page 24 of 39
I will zoom in on the chart for easier viewing (zoomed in portion

marked in red box)
Page 25 of 39
The original A line.
We will now move that line to the high of every bar, and we keep doing
so until such point in time that no bars are bisected by that line.
A -> High of one bar back. We still bisect lines in between.
Page 26 of 39
A-> high of 2 bars back. We still bisect bars in between.
Next, I will give you the series of progression without comments.
Page 27 of 39
Page 28 of 39
Here, we have finally regressed the end point such that point A, and
our other end point do not bisect any bars in between them.
Page 29 of 39
The end point we ended up with, is marked with a red arrow.
With training, you can do this really quickly.
Page 30 of 39
I will go back to our reference chart with the A line correctly drawn,
but the X line incorrectly drawn.
I will now draw the X line correctly.
Page 31 of 39
I have marked the two anchor points which are used, with red arrows.
In this example, because the X line is “further back in time” than

the A line, X would be considered the “longer term” trend, and A would
be considered the “shorter term” or “temporary” trend. Sometimes,
A is also called the “pullback”. That means in this chart, we have an
uptrend (X line) with a downtrend pullback (A line).
Page 32 of 39
The examples I have given, should be sufficient for you to

understand how to draw a trendline, quickly, and accurately.
While I have no way of proving that these two lines are indeed
correct to the current trend, I do know that these two lines do not
violate (mathematically) what we know about trends (on the chart we
are viewing), something that cannot be said for about 95% of all
trendlines drawn on almost all charts I see.
Without falling into an obvious “Black Swan” fallacy, and

acknowledging that both are completely different, we can NEVER
know that what we have drawn is a correct trendline, but we can know
quite a lot.
We know: The highest high and lowest low on any given chart,
will always be a reference point, because of the definition of trends.
We know: Highest high and lowest low, will vary, according to

the zoom’ness of the chart, and every person’s trendline will be
altered by their chart and their timeframe and their perspective on the
chart. This is due to the fractal nature of prices.
We know: Any trendlines we draw for the current bar, will not
violate the definition of a trend, i.e. that the trend line will not have
broken previous bars.
As said from a discussion with a trader who shall remain

anonymous, when you draw a trendline extending to the current bar,
trend “virginity” should not have been breached. No lines you draw
should bisect any bars between your two contact points.
Page 33 of 39
Obvious Trends, Trendlines for Obvious Trends
What if you have an obvious trend? What is an obvious trend?

Well, an obvious trend is anytime you have the current price as either
the highest high, or the lowest low on the chart.
Example chart:
The current price IS the highest price, so the trend is UP! That was
easy!
Page 34 of 39
Now let us draw a trendline for it. Using the same principle, I
have marked the lowest low on the chart as “L”. I have drawn a
trendline such that the trendline does not violate what we know about
trends. I have marked the other endpoint used with a red arrow.
Please note that no bars are bisected between L and the red arrow.
In this case, there is only ONE trendline on this chart, because the
current price is the highest high.
Page 35 of 39
Same can be said for obvious downtrends. Current price is the

lowest low, so we have an obvious downtrend.
I have marked the anchor point as “H” (Highest High point on the
chart), and marked the other anchor point with a red arrow.
Please note that no bars are bisected between H and the red arrow.
In this case, we have again, only one trendline, because the

current price is the lowest low.
Page 36 of 39
Unanswered Questions
The unanswered question I anticipate arising:
Question: “How do you then know when a trend has been breached
if no trendlines you draw, will ever bisect a bar previous to it? The
definitions you give, seem to render trendlines fairly lobotomized.”
Answer: This I answer this in the 2nd book. In the 2nd book, I will
go into more details about trend biases and previous trend breaches.
I will also cover things like trend fans.
Page 37 of 39
FGA’s (Frequently Given Answers)
Question: “By your definition, doesn’t this mean we have to redraw

a new trendline with every new bar?”
Answer: Yes and no. This partially answers one of the previously
unanswered questions when you ask this question, if you haven’t
figured that out.. Yes, you need to reevaluate the current trend, with
every new bar. Because we regress the bars when we draw the
trendlines, it might be possible that we need not redraw the line at all,
that our old line still holds true. BUT, assuming the trend has
changed, if you never erase the previous trendlines you drew for
previous bars, you will then know when the current price breaches a
previously drawn trendline. In the 2nd book, I will give a better
definition for it how to deal with and draw breaches, and how to deal
with trend breaks.
Question: “I feel suckered. By not answering the question above,

you are trying to get me to buy your second book aren’t you?”
Answer: Did you learn something from this book? If so, how can
you be suckered? The reason I have broken this book into two parts,
is because of the anticipated length of time it will take me to generate
the 2nd half. If this book was postponed to wait for the 2nd half to be
finished before it is released, the release date would be pushed back
probably by 6 months to a year, even accounting for Hofstadter's law.
So I made the decision to break the book up, so the first parts I have
finished can be released early to help as many people as possible.
UPDATE: I have finished the 2nd book called “Trendfans and

Trendline Breaks.” It is available for purchase at
Page 38 of 39
Conclusion
What started out as, me; being sick and tired of typing the same
thing and answer emails, has resulted in a book that explains the
basics of trends.
However, not reading the 2nd book does not preclude you from
thinking for yourself!! In fact, I HIGHLY recommend you question
everything I have written, and think for yourself. Chances are, with
some effort, you will be able to think of most of the contents from the
2nd book for yourself. I encourage you to think more.
Until we meet again, may all your trades be fruitful and profitable
ones.
“Reading, after a certain age, diverts the mind too much from its
creative pursuits. Any man who reads too much and uses his own
brain too little falls into lazy habits of thinking.” -Albert Einstein
Please frequent my website http://www.priceactionforex.com,

the 2nd volume of Trends and Trendlines, called “Trendfans and
Trendline Breaks” has been released. Also, come to the website as I
often offer free ebooks! Thank you for your time.
Page 39 of 39

Trends and Trend Lines

Caricato da

Informazioni sul documento

Descrizione originale:

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Trends and Trend Lines

Caricato da

Copyright:

Formati disponibili

Copyright © 2008 Albert Yang. http://www.priceactionforex.

com All Rights Reserved

Trends and Trendlines

All contents copyright © 2008 by Albert Yang. All rights reserved. No

Limit of Liability and Disclaimer of Warranty: The author has

Trademarks: This book identifies product names and services known

High Risk Investment Warning

Trading in any financial market involves risk. This ebook, the

numerous other factors related to the market in general or to the

Affiliated sites, linked sites and advertisements

areas, that information can be viewed publicly and can be collected

Sharing this Document

The information in this document is copyrighted. I would ask that you

Copyright Notice ......................................................................................................2

Introduction and Forward by the Author

Thank you for buying this ebook.

This is an ebook that will introduce you to trends and trendlines

It has been my frustration that so many books talk about “trend

Base Theory of Price

Regardless if you agree with the current price or not, regardless if

If you cannot accept this fact to be true, then I highly recommend

Reading a Price Chart

If that is the case, then it stands to reason that ANY indicators

One other important part of note, in any price chart, depending on

Opens and Closes

Given that price bars are a snapshot of a price in a block of time,

So of all the price information available to us; current price, and

A higher timeframe is nothing more than a bunch of bars from

Price Fractal Theory

Because price charts are fractal in nature, it stands to reason that

It is quite possible for 2 people; one to say the EURUSD is

This requirement might sound strange at first, but if a math model

This is where we get into the math.

Given slope as defined by y=mx+b

Then, an upward trend HAS TO HAVE slope > 0.

A downward trend HAS TO HAVE slope < 0

The two statements above, HAVE TO BE TRUE by

Only 2 points are needed to determine a slope. Because we

Because a trend is defined as that which has a slope that is

Uptrend ~ An uptrend is when the price makes higher highs, and

Downtrend ~ A downtrend is when the price makes lower highs

We know this definition to be correct because without the higher

An uptrend then, leaves a set of higher lows in its wake,

A downtrend leaves us a set of lower highs in its wake,

Price Trendline Definition

If the current price discounts everything, then it is one of the end

l If a trendline is to be drawn, it is to be drawn from historical

l If a trendline is to be drawn, by definition of slope, an uptrend

l If a trendline is to be drawn, by definition of slope, a

No “correct” trendline which is drawn up to the current price,

If a price bar is already crossed by the time it gets to the current

Because a trend is defined as slope, we have to then assume that

The least steep line in which links a highest high or

More importantly, it is the line which connects the highest

Because we do not deal with opens and closes, this definition

For downtrends, to take the point of highest absolute high price

Another example. Given line C-D.

The results look like this.

This will be the chart we will be working with in our example.

I have highlighted the bars which have been bisected in red

Because this violates the definition of a trend, we will leave the

I will zoom in on the chart for easier viewing (zoomed in portion

The original A line.