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Cory Trades is one of the fastest growing traders on YouTube. This is thanks to her simple trading strategy that replaces the complex world of trading algorithms and indicators with simple trend lines. Tori claims that just by drawing a few lines on a chart, you can find edge and make money trading.
As one of Wall Street's top traders with over a hundred million in verified profits, I feel uniquely qualified to talk about how I use trend lines and compare that to Tori's strategy and see if it actually works. Over the last few years, Tori has absolutely exploded onto the trading scene for her trendline trading strategies, which she has been trading for over a decade. Particularly because she tries to make it extremely simple for others to apply. She admittedly has way more followers than me and is way more entertaining than me. But what I lack in clout, I more than make up for in humor. Right, traders?
Okay, I don't think there's much debate as to whether she has the best looking charts on the game. In fact, I might even need to steal her style and cop me some sleek charts with my patented the One Lance B superhero blue color. Production team, make it happen. But more important than the aesthetics, what do I, an elite top Wall Street trader, think of the substance of her material?
>> Trend lines are the foundation of technical analysis. They represent the direction and speed of a specific instrument, and they ultimately help traders identify trends and possible reversals. So, what types of trend lines do we have? We have two types of trend lines. We've got an upward trend line which connects higher lows indicating bullish movement. And we've got a downward trend line which connects lower highs and signals bearish movement. Bullish trend lines, bearish trend lines. Upward trend lines, downward trend lines.
>> Okay, that basic overview is great. In fact, it matched a ton of what my own summary would hit on. I was going to lose it if I saw a bunch of randomly placed trend lines that are right through the middle of all the candles. So many people use these lines and levels, but are using them in a way that they are just total noise. What separates them from being traditional support or resistance lines is that unlike those which have a slope of zero, these are angled upwards or downwards. Uptrend lines are drawn along the lows in a rising chart with a slope greater than zero. Always use the lows, not the closes of the bar. And if the line keeps getting pierced, it's invalid. Downtrend lines are drawn along the highs of the bar in a falling chart with the slope less than zero. Again, use highs, not closes. And if the line gets breached multiple times, throw it out. As I always teach, technicals are fractals. So these work on any time frame. And I've used and seen them used on everything from tick charts on up to yearly charts. By the way, while trend lines might so far seem simple to trade, trading is always hard. Watch this video on why 95% of traders fail.
There are two traditional ways to play a trend line, and it mimics the way we play support and resistance lines. You could either buy ahead of an uptrend line or short the break of it much like we do for a support line. Similarly, you can short ahead of a downtrend line or buy the break of it much like we do for a resistance line. Now, let's also dismiss one of the biggest traditional technical analysis myths. A lot of traders traditionally believe that the more times a trend line is touched, the stronger it becomes. That's half right. The more touches make it more significant as it becomes more apparent and more and more traders might use it as a stop over time. That being said, the more times that the trend line gets touched and price can't push away, the more likely it is to break. So for me, the more accurate saying would be the more touches, the more relevant a trend line is. But if price can't push away over time, the more likely it is to break. Let's listen to what else Tori has to say about them.
>> So now we have our very first upward trend line. Point A, point B, point C. Three touch points. But when using the ray tool, it only gives us two points to adjust. All right, we have drawn our very first upward trend line. Now, this isn't the end. So, we have just simply drawn one trend line on the monthly time frame. We need to continue doing our topd down analysis. So, that means we need to work our way down to the lower time frames. So, we're at the monthly. Let's go down to the weekly. And essentially, what I'm trying to do is modify my lines to make sure they're a little bit more accurate. As you can see, it's a little bit off now. So, I need to adjust it to this new low. And then what I'm doing is I am capturing as much of the movement of the price as I possibly can. So I'm going to continue to connect these trend lines and it will start to look like a fan of trend lines. Each new line will use the previous point B as its new point A.
>> So this part was interesting to me. Essentially what Tori is doing is aligning her technical analysis across multiple time frames. Many technical traders, including myself, try to make sure their setups align across multiple time frames. Meaning for me, my absolute best setups are a long on the daily chart and a long on the intraday chart or a short on the daily chart and a short on the intraday. What aligning multiple time frames does is it gets more and more traders on your side. I want every player across every time frame to be thinking the stock is a long if I'm long or every player thinking the stock is a short if I'm short. Brian Shannon has a fantastic book on this concept, technical analysis using multiple time frames, which I read in college. So overall, I love this point that Tori made onwards.
>> My favorite way to do it is allow the trend to play out. Allow the trend to move. If the price of the Dow continues in our favor, which I'll do a little path tool just to give you an idea. If it continues down, pulls up a little bit, comes up, comes down, continues along this downward trend line, we're able to take our stop-loss and trail it into profit. So, it's no longer at that negative $51. Now, we trail it and we move it along that trend line. But as soon as price breaks the downward trend line that we're anticipating it to follow, then we know it's time to take that profit. So now, let's say that price does finally break. That means we would have been able to move our stop all the way down to 43,358, knocking us out of our trade with a profit of $129. So just think of it like manually moving your stop into profit as price progresses, as price moves in your favor along that trend line, and then you simply just wait for the price to break out of that trend line and take your profits. or if the trade doesn't work out, you'll know pretty quickly, especially when trading the bounce by putting that stop on the other side of your trend line where we originally had it here at this 43,719.
>> Okay, I actually also love this point as well. And for the traders that really want to understand trading, it leads to an important teaching lesson she didn't dive into that I'll expand on. One of my favorite parts about using a trend line as a trailing stop is exactly what she mentions. as the position works in your favor. In a way, you're actually locking in profits because your stop is trailing in your favor as the move progresses. This is different from when you play a normal support or resistance level. Now, ready for some very advanced analysis on a conceptual level. That trailing dynamic is also why the default technical analysis method for trading trend lines is the way it is. I don't want to be buying just above a downtrend because then my stop keeps moving lower and my risk grows as the trade moves against me. We don't want that, right? There's another huge benefit to what Tori discussed there that is also worth me mentioning. Your profit- taking rules are very explicit with how Tori described them. So many beginner traders need very explicit trading systems where they know if X happens, do Y. In a traditional break of support or resistance, what is the default take-profit rule? Many people don't have a clear, simple, easy answer. Beginner traders in particular are mostly trading on vibes. Just because the system is simple doesn't mean it doesn't work. In fact, for a ton of my trading, I use a default stop in trending moves of prior bar lows or prior bar highs. For all those reasons, I can't emphasize enough how much you can learn from deeply thinking about what I'm discussing here. Whether you trade trend lines or not, how we think about effective trading systems is incredibly important. In general, you want a trailing stop that locks in profits. You want explicit rule sets. You want simple rules that reduce subjectivity so that you have less processing to do in the heat of the moment.
Many might be wondering what my criticisms are of Tori's system so far. Now, keep in mind I am not an expert on her system and I'm only speaking from the videos of hers I've watched. But I think the most critical aspect of simple effective trading systems that I haven't seen her quite address is the criteria regarding the need to be highly specific with when and to what tickers you should apply those simple systems. Very simple systems like how I often use trailing prior bar lows or prior bar highs work exceptionally well, but all of the nuance exists in when you apply it and under what conditions. Especially with futures, which I believe she only trades, I personally find those markets extremely efficient except for when the instrument is very inplay. What do I mean by that? I only want to trade stocks or instruments that have fresh breaking news or exceptional technical setups on the daily. For example, gold recently had both a news catalyst in the form of dovish Fed comments while also having a beautiful breakout of a long consolidation. As a result, I traded gold futures, but normally I tend to avoid them. Markets overall are very efficient most of the time. If you overlook the criteria of when to apply a simple system, you're going to find yourself with no edge. So, my chief concern for traders looking to replicate Tori's system is that they would not be nuanced enough in their application of it. If I were mentoring Tori, I have a sneaking suspicion that she would greatly improve her own performance by further refining those application criteria. Another huge unlock for her would be if she were to consider applying her system to other products, particularly equities or even options. In fact, there are options on futures, which while complex and not for noviceses, can greatly amplify a trader's expected value when used in the right situations and by someone who already has edge like Tori. Without a doubt, there is a learning curve and there are risks to growing into those other areas, but that would be a good long-term goal over a few years to consider. The beauty of using futures like Tori is doing, for the most part, futures tend to have a ton of liquidity, low commissions, and you can scale positions into the millions of dollars or sometimes more with minimal slippage. Tori most likely has room to grow to become a seven-figure trader with some minor refinements.
So, how do I use trend lines in my trading? Two main ways. First, more broadly, trend lines help me define the overall trend, which shapes the rules I follow. For example, I won't short a stock in a clean uptrend unless it capitulates in both price and volume. That discipline prevents me from fighting strength. Second, trend lines give me structure for executing my trade. I'll buy close to an uptrend using it as support or short the break just like I would a support line break. On the other side, I'll short into a downtrend using it as resistance or buy the break once it confirms the trend is flipped. One of my favorite setups is buying the break of a downtrend line on the right side of the V. When momentum shifts aggressively, take this example of Nicola from a few years back. It was selling off after hours on a piece of news. A huge volume exchange occurred at the lows. We then break the downtrend line for our entry and start to sharply bounce.
Let's summarize my take on trend lines. Trend lines are one way of visualizing market sentiment and trend. When applied properly using the right criteria, they can add huge clarity to your setups and help you execute your trading system. For me though, they are just one tool I use in my playbook. Did you enjoy this critique style of video? If so, let me know. Give a subscribe and I'll see you for the next one.