Multiple Timeframes and Trend Lines pt2

IF you’ve read the first part of this series on Trend Lines, you picked up how to use them to frame the market in terms of trend direction.

You found out that by using the objective trend line known as TDLines, you were able to zero into current market conditions by using the most current price swings.  Understand that I don’t use the entire TD methodology but do like the objective way of drawing what can be very subjective trend lines.

This post is going to wrap up this subject.  Using a blog format, it is difficult to get into the nuances of this however you should see how you can implement this in your own trading.


Trend Line Downtrend

We left off with a downtrend on the daily but an uptrend on the four hour chart.  Any trades taken long would be counter to the daily trend.  The 30 minute chart was in a series of higher prices taking us in the same direction of the four hour chart.


Each time frame can be in different stages so it is common to find higher and lower time frames not in agreement when it comes to trends.  A down trend on the lower time frame could be a correction in the up trend on the higher time frame.

It’s also possible that the lower time frame is showing that the higher time frame may be rolling over.

To make this very clear, I want to show the 30 minute Forex chart in a trade that was taken after the first post and I thought of taking a screen capture.


Price had broken an uptrend TDLine but above the four hour TDLine.

Here is the key question:  Was it counter trend? 

In terms of the four hour it certainly was but against the daily it was with that trend as determined by the trend lines.  However…..resumptions of higher time frame trends starts with breakdowns of the counter trend on lower time frames.


Trade Position Details

So how does this play out?

  1. 30 minute breakdown in the direction of the overall trend
  2. 30 minute breakdown in the direction of the overall trend
  3. Four hour still in uptrend with the daily supply line about 250 pips higher
  4. Shorted using a Fibonacci level after a retrace after the TDLine break
  5. Set profit target liberally using the weekly chart
  6. Fully aware of the four hour line
  7. Need four hour demand line to break to carry towards target.
  8. Price bounced and then exited trade when failed to break the next bounce
  9. The X on the chart shows the break to the upside of a supply line on the 30 minute after a bounce on the four hour demand line.  This leads to a trade long with target in the area of the daily supply line.Note the double top on this chart below taking place right on the daily supply line.current
    • The yellow highlights where the short trade took place.
    • The bottom X is where the long became interesting.
    • The white lines were drawn after the first post as market action changed.
    • The only white lines still valid are labelled one and two.  The green and blue are accurate.

    A lot to digest but I hope you can see how these lines were used.  They were not traded as a method by themselves but framed the market to enable an educated view of any trading opportunity.  You knew where you were in the bigger picture.

    I will wrap it up with current context. 

    Using the TDLine at a level 3, We are basing right at the four hour demand line.  If I were to use a level 2, the current candle is breaching a 30 minute supply trend line.  The less candles on either side you require will give you more trading opportunities.

    For the purpose of this post, I left it at level 3 so as not to clutter the chart.

    This post though was not to educate on the TD method but was to give you an objective way to draw trend lines.  How you eventually use them…I will leave that to you.

Author: CoachShane
Shane his trading journey in 2005, became a Netpicks customer in 2008 needing structure in his trading approach. His focus is on the technical side of trading filtering in a macro overview and credits a handful of traders that have heavily influenced his relaxed approach to trading. Shane started day trading Forex but has since transitioned to a swing/position focus in most markets including commodities and futures. This has allowed less time in front of the computer without an adverse affect on returns.