Trend Analysis
Assume that a trader only initiates a breakout in the direction of the existing
trend. The trader would be initiating long position in an uptrend and short posi-
tions in a downtrend. Over the long term this would be equivalent to a longer‐term
bidirectional trader entering the market on a breakout. Hence we see that even
though a trader only trades in one direction at any one time (being unidirectional),
over the longer term this would essentially result is trading bidirectionally in the
market as the trend moves up and down. The only condition that would disrupt this
equivalence would be if the unidirectional trader did not take every qualified trade.5.10 Drummond Geometry
Drummond Geometry was developed by Charles Drummond over a long period
of time. Drummond geometry helps keep the trader on the right side of the mar-
kets. It basically consists of:■ (^) A short‐term moving average referred to as the PLdot line
■ (^) Inter‐bar trend lines
The reader is advised to refer to The Ultimate Trading Guide by John Hill,
George Pruitt, and Lundy Hill for a detailed look at Drummond geometry. The
PLdot line is represented by a simple three‐period moving average of typical price.
This moving average may be forward shifted by one period to provide an early
prognostication of market sentiment. To be very brief, when price is above the
PLdot the market is regarded as bullish, and when price is below the PLdot the
market is expected to be bearish. Another approach that some practitioners take
is to buy when the PLdot line turns up and sell when it turns down. Note that
inter‐bar trendlines connecting the highs and lows are also used to forecast poten-
tial support and resistance. See Figure 5.59.
figure 5.59 PLdot Line Indicating Potential Future Direction on the Weekly Chart
of the EURUSD.
Source: MetaTrader 4