HOW TO TRADE AND DRAW TRENDLINES
How trade trendlines, we’re going to cover the basics, and then we are going to take a look at a few specific strategies.
So when it comes to drawing trend lines it is usually very straightforward.
The first very important point is that you need at least three touchpoints to confirm a trendline.
you can always connect any two random points on a chart.
So we need to have three touchpoints to confirm a trendline it looks like this below picture.
We have the origin where we have our first swing point then obviously on the next swing point.
And we can draw our connection again you can connect any two random points and only if you get the third bounce.
Then you have a pattern and then you have a trendline that is validated in the markets.
So after the second touchpoint, you can wait for the price to get here, and then there are a few strategies.
That we can apply and that we will learn later on how to capture those trades here again a very nice trendline.
let’s start with the first which is trend trading with trend lines
nowhere is exactly what you want to look for.
When trend trading with trend lines which is an area where support or resistance crosses with a trend line.
So let’s take this one step further this area is of high confluence because different types of traders are all watching it.
What should be going through your mind as a trader also to point something out
we are only using a one-time frame?
In this example which is the daily time frame.
And the reason this is important is that later in this post
I will begin showing you how to use multi-time frames.
So first you would have established that this is a moving downtrend as the price was making lower highs and lower lows so you would want to trade with the moving downtrend.
Second, you would have identified your trend line through these three points and drawn it in and had it stretched out further in case the price came back up to it.
Third, you would have looked left and spotted the support turned resistance level here and had it drawn in.
Fourth you would have then identified this area of high confluence where your trend line
and resistance level intersected which means there would be possible short trade opportunities once price got here.
The fifth when the price started to approach this area
since you had this area already identified you were watching
to see what price would do once it got here okay a price action.
Continued till Next Post…