This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Quant Talk: What Is the T-Line?

NEW YORK (TheStreet) -- Have you heard of the t-line? Many traders and investors alike are using the t-line as an indicator for entering and exiting trades with great success.

A candlestick swing trader named Rick Saddler coined the term "t-line" while working in his trading room.

The t-line is the 8-day exponential moving average, or the 8 EMA. An exponential moving average puts more emphasis on recent data than on older data. A moving average takes a subset of data and averages them to accentuate trends and help traders make decisions about buying and selling.

Rick isn't the first person to use the 8-day exponential moving average; he just coined the term and developed a trading strategy based on the t-line. That strategy is becoming more widely used by all types of traders.

The simple rule of the t-line is that if you are in a long trade, you want the price action to close above the t-line to stay in the trade. The opposite is true with short trading. You want to stay short if the stock closes below the t-line. As with all signals and chart patterns, there needs to be confirmation or follow-through the following day.

A key component to using the t-line correctly is to always get confirmation. On daily charts, confirmation comes when the following day's candle has fully formed. (The candle is a chart of a stock's price, generally over the course of a full day. It shows that price in a candle-shaped form, with the candle body as the range of the stock price from its high to low over that time frame.) Confirmation is necessary with any chart time frame. If you trade the 4 hour chart, confirmation comes when the next 4 hour candle has fully formed, and so on.

The t-line works with all trading plans. It works best when trading on daily candlestick charts. It works on monthly, weekly, daily, 4-hour, 1-hour, 30-minute and even 15-minute charts. But it's not as reliable on the 1-minute, 5-minute and 10-minute charts.

With that in mind, the t-line is most beneficial to the swing trader. Long-term investors can use the t-line, but investors aren't typically getting in and out of trades as the price action goes up and down within an upward channel.

Set up the t-line on your charts and watch for yourselves. It is quite simple.

Let's look at some charts now.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
SPY $206.67 -0.31%
ALK $66.16 1.77%
AAPL $126.00 -0.35%
FB $87.55 0.30%
GOOG $522.86 -0.10%

Markets

DOW 17,683.58 -46.53 -0.26%
S&P 500 2,068.76 -8.02 -0.39%
NASDAQ 4,991.94 -17.2740 -0.34%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs