You often mention trading channels and I know you use TC2000 for charting. Could you share your settings for these channels? (envelope channels in TC?) And, do you ever use Bollinger Bands? (May 6, 2002)
The channels we discuss are not generated by any charting service tools. What we are doing on these and what we teach in the online seminars is to draw a trendline for the stock or index. It could be an up trendline or a down trendline depending upon which way the stock or index is trending. If it is an uptrend, that means connecting the predominant lows in the trend. The more you can connect, the better. In a downtrend we would connect the predominant highs; we can toss out an aberration where the stock or index makes a sharp move that quickly reverses. We then draw the other trendline that forms the channel. On an uptrend that means we draw a trendline connecting the predominant tops. Again, that is a trendline that touches the most tops on the rise. If a stock breaks above that channel by 2 to 3%, we need to be cautious of a larger drop toward the lower trendline. On a downtrend we draw a trendline connecting the predominant lows, with the line drawn to hit the most lows. When you look at a trending stock or index, you can almost eyeball it when you get more experience. These channels are very reliable indicators of stock movement. We look at but do not really use Bollinger bands either, preferring to have the straight trendlines being our guide. In our experience, trendlines keep us in good plays and out of trouble in the vast majority of the trades. As taught in the seminars, simply using the trendline analysis we teach will help make you a better investor immediately by getting you into good positions and getting you out of decaying positions.
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