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- TSP #19 - Trendlines
Marco Johanning
Hello everyone!
Welcome to the nineteenth edition of my newsletter! Every Saturday I’ll be sending out a quick newsletter on how to master crypto.
Today, I focus on Trendlines.
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Clickbait
I've seen so many incorrectly drawn trendlines on Crypto Twitter, that it's really time to shed some light on this topic.
Even some large accounts with thousands of followers make mistakes when drawing trendlines, wich brings us to the danger of trendlines right away.
All too often, we want to see something in the chart that isn't actually there: a reason to continue hoping for a desired outcome. And people will always find some points in the chart to draw a line.
And this is where some large accounts come into play again: They share clickbaits. They want to grab as many impressions as possible through dramatic analyses and headlines. This often has nothing to do with technical analysis.
Learn the difference and distinguish real trendlines from desired ones! Trendlines are one of the most valuable tools in TA when applied correctly.
The breakout did indeed happen (see my post below with the trendline on the 15-minute chart), but be cautious with such posts!
Definition
The fundamental requirement for a trendline is, as the name suggests, a trend! And that's where the trouble begins. If there is no trend, there can't be a trendline. Logical, isn't it?
In an uptrend, there are successive higher highs and higher lows. To draw a trendline, the higher lows are connected with a line, usually including all price action (including wicks). In a downtrend the successive lower highs are connected with a line.
While you can draw a line with just two points, you can speak of a valid trendline only when there have been at least three touches.
The more touches, the more stable the trendline is.
When a trendline is broken, just like with S/R levels, support transforms into resistance, and vice versa. Usually, it is assumed that the rejection extends as far as the distance from the higher high (or lower low in a downtrend) to the trendline.
Here's a real-life example from a few days ago. I would assign more significance to this trendline than the trendlines Rover drew across the wicks on the 2-hour chart of Gate.io.
But Marco, isn't it just a line on the chart that doesn't really have any significance?
No, just like with S/R levels, there's a sound psychology behind trendlines that comes into play when the trendline or the S/R level is valid.
I'll write about this super exciting topic in the next issue!
Twitter Reads
Listen to this and you'll understand why I've had beef with tradersz and xo for years now
But every time I say something I get viciously attacked by fanboys that they're dumping on
Oh the irony
— DonAlt (@CryptoDonAlt)
5:16 PM • Sep 6, 2023
I think DOJ charging Binance with a big fine will mark the bottom, up only from then
waiting...
— Mac 🐺 (@MacnBTC)
6:56 PM • Sep 1, 2023
I am starting to get little afraid that if ETF is ever approved, your average boomer is going get a heart attack on stuff like this.
— adam (@abetrade)
12:09 PM • Aug 31, 2023
With my best regards and wishes, I hope you have a wonderful weekend.
Marco Johanning