Why do trend lines on a chart work so well?

David Frost // Market Outlook


June 2  

It’s the chicken or the egg.

I’ve heard many times over the years, “how do you know that trend line will hold” or “how did you know that trend line would be the top?”

Truth be told, it has nothing to do with me.  It’s all about the chart pattern developing in a manner where price determines the line being drawn all by itself.

When you can connect tops and bottoms with a straight line, it was the market telling you that price level was of importance.

For us, it’s a matter of identifying the important price levels, not creating them.  This is the hallmark of technical analysis, and also the reason why 10 different technicians can come up with 12 different market interpretations.

Today the market was rather erratic, especially for a lighter volume day.

In tonight’s video we’ll discuss all the markets and get a fresh perspective of where we are and more importantly where we go.

About the Author

Trading and investing in markets is second nature to some, but a mystery to others. The goal is to provide a forum where everyday people aspiring to be part time or full time traders will learn how view markets differently and profit beyond their wildest dreams.

David Frost