In this video, I set up a trading plan and introduce a trend line exercise you can practice in any market and in any time frame. There is no one right way to draw a trend line, it’s a matter of function and what you are trying to see. We will be drawing a trend line off two relative (same size swings). This will identify the footprints of organized volatility on a chart.
This exercise is designed so that you can learn about markets and price flow in your own experience. Its objectives are:
- Learn to isolate relative market structures.
- Learn to set yourself aside and follow price no matter what price is doing.
- Allow the practice and price flow to teach you.
We first need to make some objective swing definitions:
- Confirmed Swing High/Low: A new high confirms a swing low and a new low confirms a swing high.
- Balanced/Relative Swing: Same size reaction legs.
One Line Practice Instructions:
- Identify two confirmed relative swings
- Anchor a trend line at the two lows and make observations (not expectations) about how price interacts with the line.
- Always follow the last two relative confirmed swings with the trend line.
- Draw a box across the top of each swing and observe how price interacts with the boxes.
By identifying two same-sized swings that confirmed new highs, we have found some organized volatility and behavior. We can then participate in that continued behavior or have a way to know when it changes.
Shane