24/09/2009 – How a Kid With a Ruler Can Make a Million

When I began my career as an analyst, I was lucky enough to have some time
with a few old pros.

One in particular that I will always remember told me that a kid with a ruler
could make a million dollars in the markets. He was talking about trendlines. I
was sold.

I spent nearly three years drawing trendlines and all sorts of
geometric shapes on price charts. And you know, that grizzled old trader was
only half right.

Trendlines are one the most simple and dynamic tools an analyst can employ…
but I have yet to make my million dollars, so he was wrong — or at least early
— on that point.

Despite being extremely useful, trendlines are often overlooked. I guess it’s
just human nature to discard the simple in favor of the complicated.

(Heaven knows, if they don’t understand it, it must work, right?)

In the chart above, I have drawn a trendline using two lows that occurred in
early August and September of 2003.

As you can see, each time prices approached this line, they reversed course
and advanced.

Sometimes, soybeans only fell to near this line before turning up.

Other times, prices broke through momentarily before resuming the larger
uptrend.

What still amazes me is that two seemingly insignificant lows in 2002 pointed
the direction of soybeans — and identified several potential buying
opportunities — for the next six months!

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