You have been gone through many trendline patterns, but my ways will be most accurate and probable.
After Losing more money while trailing many types of patterns, I have finally been successful in trendline trading strategy.
Many people are losing their valuable money on keep trying and trading many types of strategies.
I am not a master in the market; I am just a learner.
I was here to share my knowledge.
Let’s start working and learning together.
Firstly,
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What Are Trend Lines?
A trend line is a line we draw on our charts that connects the swing highs and swing lows during a Trending Market.
How To Draw A Trend Line In A Downtrend For Trendline Trading Strategy?
We have a downtrend market; we run and pull back again, a run and a pullback.
At the bottom of each run, before the pullback begins, it is called swing low, and at the top of each withdrawal, before the run starts, it is called the swing high.
In an ideal downtrend, the price will make new highs and new lows.
Now use a trend line to connect the swing highs and the top and swing lows along the bottom.
How To Draw A Trend Line In A Uptrend For Trendline Trading Strategy?
We have an uptrend market; we run and pull back again, a run and a pullback.
At the top of each run, before the pullback begins, it is called swing high.
At the bottom of each pullback, before a run begins, it is called swing low.
That means in an ideal uptrend; the price makes higher highs and higher lows.
Then apply the trend line to connect the swing highs and the top and swing lows along the bottom.
Price won”t always move this smoothly in trending markets, but this is what you want to reference for what an ideal trend movement will be taking place.
Why We Exactly Draw Trend Lines For Trendline Trading Strategy?
Trend lines will act as a form of support or resistance, but also, a break of a trend line will be the signal for a possible trend change.
Along the top, the trend line acted as resistance when price touched the trend line.
Along the bottom, the trend line acted as support when price touched the trend line.
You don’t enter trades blindly because the price has touched a trend line; you should always wait for the price action.
One More Reason Why We Should Draw Trend Lines Trendline Trading Strategy?
Is,
A break of a trend line will give a signal for the possible trend change.
In a downtrend, we have a trend line placed above the trend.
When the price breaks this trend line towards the bullish side, it can signal a possible trend change.
We have a trend line placed below the trend.
When the price breaks this trend line towards the bearish side, it can signal a possible trend change.
In an uptrend, we have a trend line placed below the trend.
When the price breaks this trend line towards the bearish side, it can signal a possible trend change.
Again when the downtrend starts, we place the trend line above the trend; when the price breaks this line towards the bullish side, it will be a possible bullish move.
It is a cycle of bullish and bearish moves. So by drawing the trend line, you should have to take the trades of bullish and bearish moves.
Do not enter the trade; when the trend line has broken, you must watch the action of the price before the entry.
While Drawing The Trend Lines, The Following Are The Rules.
In trendline trading strategy for drawing the trend lines,
- you should need a minimum of 2 to 3 touches of the candle shadows.
- The more touches may not hold for the next time.
- Swing highs and lows should be inside the trend line.
- Draw the trend line; if the trend line had occurred naturally, do not force yourself to draw the fake trend lines.
- Use trend lines for your guidelines and analysis but not for the sure-shot signal for the trade.
Trends will not occur smoothly; they are choppy.
Draw your line in an area where you can get the most amount of touches, and either candle closes, candle bodies, or wick ends.
For applying the trend lines, you have to get a suitable movement; either you won”t be able to use the trend line in a moving trend consistently.
In trendline trading strategy there will be some Imperfect trend lines.
In imperfect trend lines, you won”t be able to connect always all the swing highs and swing lows while drawing the line.
In that case, try to connect that gives you the most touches and leave the untouched ones.
How To Use Trend Lines For Trendline Trading Strategy?
You have to look for the price action patterns before a trend line breakout.
Types of price action patterns are wedges, triangles, price action combining patterns with candlestick patterns.
My favorite patterns in trendline trading strategy are.
- double top or double bottom pattern
- trend change pattern
Double Top Pattern For Trendline Trading Strategy.
What does double top give the signal in trendline trading strategy?
This double top strategy will be applicable in the uptrend.
The double top pattern is a reversal pattern.
It shows a loss of momentum from the buyers, and it is the signal for you to go against the dominant trend.
Don’t chase trades because, as you can see, there is always another opportunity and another entry.
Vice versa, in a downtrend, the double bottom pattern will be applicable.
Look for a price action reversal pattern inside of the weekly double bottom.
How To Identify Trend Change Patterns You Look For These Traits Specifically?
- You have to look for a lower high OR a lower low to occur right before a trend line break in an uptrend.
- In the downtrend, you have to look for a higher high to happen right before a trend line break.
How To Maintain The Quality Of The Trades In Trendline Trading Strategy?
The more concepts and strategies you learn, the more will your trade quality.
The deeper you get into the price action, the more you will understand the quality of the trade.
You should know when to take trade and when to pass on without making an entry.
All you will gain from your experience and practice.
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