Vast majority of traders forget about importance of trendline nowadays. They keep searching for a Holy Grail in Forex robots and expert advisors, usually ending up dealing with a no-win situation. If you are a professional trader I believe you will get my point straight away. Trendlines are unavoidable component of each technical analysis. Therefore, it is quite tricky to avoid using them.
Good performance of all the tools is conditioned with correct utility and it is not different with trendlines either. It’s disturbing me when I realize how many traders cannot correctly pick high and low levels to draw a trendline. If you have recognized yourself, don’t worry, not everything’s lost yet.
WATI indicator can change quite few things here as it serves to find the most significant high-low levels, marking and joining them with trendlines.
You can use WATI in Elliot wave analysis as well. However, I’d leave it for some other post as it would complicate this one to the point where nobody would enjoy reading. And honestly, it would give a bitter flavor to my writing as well.
This indicator possesses the main three elements:
1. Semaphore – High & low periods.
High period – red circle 3
low period – yellow circle 2
lowest period – violet points
2. Trend Lines – High & low.
High trendline – red flattering line
low trendline – yellow continuous line
3. Forecast trend line – high (pink line).
Indicator can be used in various ways and I will try to explain it in the broadest and simplest possible way I can think of. I will warn you that once you load the indicator on the chart you get a big mess with lines spread all over the place. Don’t get confused, not everything’s so complicated as it seems at the first glance.
What you have to do is to follow up the price and keep an eye on trendlines found right next to the price. Current chart shows EUR/USD pair, where you can spot the two trendlines sitting close to the price. I marked their rendezvous point with a grey circle.
Sell example – How to use the trendlines in this case? If you are in a sell position, these trendlines tell you how the price is most likely encounter support in the marked area. This would be a great place to setup a stop loss.
Buy example – if you plan to open buy position (your strategy suggests you to buy) then this indicator serves as a buy confirmation. Ideally, you buy at the marked levels and set the stop loss beneath.
If I increase the existing chart to H4, as shown on the chart screenshot above, the similar situation occurs. Again, there are two strong supports, point 1 and 2. Pretty much everything indicates that the price would have troubles to break through all the supports. Area above the price is fairly clear, i.e. there are no resistance trendlines, thus it suggests a nice occasion for opening buy position.
I advise you to keep an eye on trendlines close to the price and open them either for opening positions, setting stop losses or take profit levels. It would be the best to incorporate this indicator into your strategy and see how it works. This is why demo accounts are invented!