Blue sky, open road and no speed limit. The speedometer tips closer to 100 as you push the accelerator and downshift like a boss. Bravado aside, you know inside that a wrong move will send you to your maker in the blink of an eye.
If your heart rate doesn’t go up as you signal your entry into the left lane for the first time on Germany’s Autobahn, something might be missing. With over 2 million accidents, it’s not to be trifled with if you don’t know what you’re doing.
Just as the lanes are religiously respected by the locals, you can establish lanes in the markets you trade to signal your entry. Parallel lines are a quick, easy way to accelerate your profits in trending markets.
How to find the passing lanes for your entries
If you think the Autobahn is a place for reckless abandon, think again. There are rules and they are obeyed – period. For starters, the left lane is the passing lane – no lollygagging around – get in that lane and make your move, or don’t.
Parallel lines can offer a similar structure when determining which lane to be in when trading during a trending market. Established correctly, these are identical lines, on both sides of a trend. They indicate support, resistance and potential reversal points.
They can be placed together at different attitudes (angles) to map a trend. The concept is shockingly simple and incredibly effective when charting potential entries.
Projecting trends simply by placing smart guardrails
The symbol for the Autobahn is impossible to miss – two thick lines heading under a bridge and beyond. It almost begs you to push the gas pedal through the floor.
Parallel lines placed on a chart create a similar presence as they shape a lane that clearly outlines a trend. To create them, you simply have to make sure the lines are identical and properly anchored on both sides of the trend.
Using our ES example, you can set this up by:
• Picking two points at the top of a trend to draw your trend line.
• Copy the trend line. In NinjaTrader, simply select the line, press Ctrl+C (to copy) and then Ctrl+V (to paste).
• Place the start of the second line at the lowest point between the top trendline anchor points.
Once in place you have a clear lane with which to start plotting potential entry opportunities.
Entry opportunity on ramps that are impossible to miss
The guardrails for the entire length of the Autobahn are double-sided, with blinders to signal upcoming curves. Staying within their boundaries is a good idea if you’d like to stay alive.
The same holds true with trend lines:
Once a trend is established, price tends to fluctuate between the high and low points as it finds its new level of consolidation. With your parallel lines in place, you can see the guardrails that price is largely respecting with both support and resistance.
As price approaches the guardrail within your trend lane, watch and plan for a reversal. Extending our example, you can see how many times price respected these boundaries as the parallel lines served as reliable reference points.
It’s these moments that present excellent scalping opportunities. In this case, at least 4 intraday trades would have generated a tidy profit just by paying attention to these parallel lines.
A simple, fast, yet breathtakingly easy way to deploy strategy.
How can you ensure price will respect your lines?
It’s not a coincidence when price tests and then retreats from a high or low within any particular trend. In addition to using these points as your anchors for your parallel lines – you can also quickly verify their legitimacy by looking back in time.
With each peak and valley, you’re likely to find prior points when price tested similar levels either as support or resistance and then thought twice. It’s like spotting paint skids on the guardrails – knowing who got the best of that exchange.
Plot high and low price levels back in time horizontally regardless of the angle of your trend. This will confirm that the level was previously tested and that you should in fact use this as an anchor for your parallel lines.
Doing this will give you confidence that you are establishing guidelines that price is likely to respect moving forward.
Accelerate your profits with confidence today
For good reason, it’s not easy to get a driver’s license in Germany. The training includes advanced courses in high-speed car control – mostly because cars handle much differently above 90 mph. When you hit the road, you can expect that the Germans will know what they are doing.
You can take the wheel with confidence when entering the left lane of the market simply by establishing your lanes with parallel lines.
During periods of high volume, chart the high points of price using a single line. Duplicate that line and fix it to the lowest price point at the middle of that same period. With these lines in place – you have your lane with which to trade.
When price touches either side of the lane, expect these to serve as guardrails for support or resistance. Prepare your entry with an eye on volatility conditions, planning for a reversal back to the other side of the lane.
Keep both hands on the wheel while you put your foot to the floor on accelerating profits.
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