3 Successful Trendline Trading Strategies Simplified (FOREX)
Forex trendline trading strategies or strategy is a skill that is simple to understand and it generates much profit in day trading and swing trading or even position trading.
What is trendline trading?
How do you draw trendlines?
Do trendlines break out?
These and many other questions will be answered in this post.
Mastering trend lines and trendline breakout trading strategy is a skill that both beginners and intermediates will look to learn and use for their day-to-day trading.
What is a Trendline?
This is a technical drawing tool used to define the direction of the price of an asset. The trendline can also act as a support or resistance zone while showing the direction of the trend.
Just like support and resistance, trendlines show markedly the rise and fall of price during the bull market and/or bear market.
Trendlines trading strategies are vital technical analyses used in financial markets such as forex, stocks, cryptocurrency, indices, and commodities.
The peaks (above current price) and troughs (below current price) of trendlines represent the resistance level and support level for that given period of time frame where they are drawn.
However, trendlines are best drawn in the daily or 4-hour time frame for day trading and scalping purposes.
Types of Trendlines in Trendline Trading Strategies?
For an upward trend, with a series of higher highs and higher lows, a straight-sloping trendline is drawn upwards in relation to the lows (troughs).
For a downward trend, with a series of lower lows and lower highs, a straight sloping line is drawn downwards in relation to the highs (peaks).
Another straight sloping line can also be drawn in parallel to each of the above conditions to form trendline channels.
These trendline channels form the support and resistance levels.
Trendline channels enable a trader to place either a buy order at support levels or a sell order at the resistance levels.
Narrow channels show significant strong trends either upwards or downwards.
How to Draw Trendlines in Successful Trendline Trading Strategies
Trendline trading strategies are drawn in relation to the price of an asset in the financial market.
The use of different charts to see price movement on trading platforms has made a huge success in trading the financial markets.
Candlesticks are best adapted to trading because of their significant history and relevance with price action.
Wicks or shadows of these candlesticks may hinder drawing a perfect trendline, I advice having 2 straight lines for one support level on a few situations where wicks have acted as spikes in the market.
Major swing points are used in drawing trendlines, two major swing points are used, and only the best number of touches are used at the close (or low) and open (or high) of the candlesticks.
The bar chart can also be used to draw a perfect trendline while checking out the perfection on the candlestick chart.
The 3 Succesful Trendline Trading Strategies Simplified
Do you look to use trendlines for a higher reward in your day trading?
Does trendline make good trades?
Trendline trading strategies are boosters of technical analysis and this skill can never be sidelined to any other technical tools.
The best use of these strategies is employed with other trading skills.
There is no holy grail skill in trading the financial markets.
Using Trendlines as a Support and Resistance Level
The usual support and resistance levels used by traders are the horizontal levels on the charts.
Here, sloping lines are used to replace the horizontal lines.
Trendlines are used to identify the direction of the market and to identify directional changes.
When the trendline is pointing upwards, the uptrend stands
And when the trendline is pointing downwards, the downtrend exists.
The support level holds only if the price has bounced off the area at least in two instances either with a bullish candle formation or any other candlestick pattern formation.
The resistance level also holds only if the price has bounced off the area at least twice. Candlestick pattern formations can be used as entry triggers.
The stop loss is placed above the peaks of the trendline in a sell trade and below the troughs in a buy trade.
Using Trendlines as a Trend Breakout
For every trend breakout, you must have observed a change of direction with the use of candlestick formation.
However, when the price first accumulates around the peaks or troughs, a breakout can be expected.
In a breakout, it is often intelligent action to wait for a retest
Does the candlestick breaks and close above the peaks?
If yes, it could be an indication of a breakout
Does the price breaks down the troughs and close below them?
If yes, then a breakout trade exists.
Only wait for a breakout above the peaks (resistance) and/ or below the troughs (support) before you can be sure it’s a breakout and be sure it’s not a spike by waiting for a retest on the lower time frame.
Using Trendlines as a Trend Continuation
This is a unique trading skill to ride massive trends.
First, do you have a narrow trendline channel?
If yes, the trend is strong!
For a strong trend, use a trailing stop loss to ride the massive trends
Ensure you draw a very good trendline with a concentration on major swings and having many touches on the wicks of the candlesticks.
Avoid parabolic moves of prices and exit trade when the opposite traders make a larger move.
In this post; 3 Successful Trendline Trading Strategies Simplified (FOREX), you have learned:
What is a trendline?
Types of trendlines
3 Successful trendline trading strategies
Trendline trading strategy secrets revealed