Hello traders! This week’s Lessons From the Pros article goes back to one of my preferred trading techniques – trading where supply and demand intersect a clean trendline. To properly trade this strategy, you must first understand how and where to draw these lines.
In many of these newsletters you have been reading and (hopefully!) applying to your own trading, many of our instructors/writers have described in detail how to properly apply supply and demand zones. Basically, a supply zone or level is the origin of a sharp move to the downside, and a demand zone or level is the origin of a sharp move to the upside. For more in-depth descriptions of how to draw in these levels, go back in our extensive archives and refresh your memory. What isn’t discussed as often is trendlines.
There are two basic schools of thought on how to draw in trendlines. The first school says we draw off of the absolute highs in a downtrend, and the absolute lows in an uptrend. This takes into account the highest and lowest points on the candles we are drawing from. In markets with centralized exchanges like futures and equities, this technique is often preferred. The second school of thought says we are looking for the most touches of the trendline-at times disregarding parts of candle wicks and tails,… Continue Reading
