T~line trading was developed by Rick Saddler, and is a relatively new phenomenon. Rick coined the term “T~line” while working as a moderator in a trading room back in 2004. He noticed that if a long stock stayed above the t~line, it would likely continue to rise. The T~line is defined as the 8 day exponential moving average, or the 8EMA.
Many people use different moving averages as support and resistance. Support is where there is buying pressure, and resistance is where there is selling pressure, in short. Moving averages are lagging indicators, which is kind of like a train laying it’s own tracks as it runs through the countryside. Some of the most commonly used moving averages are the 10 day simple moving average (10 SMA), the 50 SMA, and the 200 SMA, but there are many others (21 EMA, 34 EMA, 72 EMA, 100 SMA, to name a few).
People have used the 8EMA before, but Rick has developed a trading plan that uses the T~line as a trigger line for entries and exits. The T~line works for all trading plans, but it works best when trading on the daily charts. It still works on the 15 minute and the 30 minute charts as well, but not as reliable on the 1 and 5 minute charts. With that in mind, it’s most beneficial to the swing trader. Long term investors can use the T~line, but investors typically aren’t getting in and out of trades as the price action goes up and down within an upward channel.
Set it up on your charts and watch for yourself. The simple rule of the T~line is that if you are in a long trade, you want the price to close above the t~line to stay in the trade, and the opposite is true with short trading, you want to stay short if it closes below the t~line.
Here is an example on Google…NASDAQ (#GOOG)
Here is an example on Alaska Airline (#ALK)…
Try out the T~line, try trading it, and check out the Rick Saddler’s site for more tips and ideas on trading the t~line.