Wysetrade
Learn about key trendline trading strategy in this video. Trendlines are lines drawn on charts to connect swing highs and swing lows during a trending market. In an ideal downtrend, price will make lower highs and lower lows, while in an ideal uptrend, price will make higher highs and higher lows. Trendlines can act as forms of support or resistance and a break of a trendline can signal a possible trend change. Pair trend line breaks or rejections with key price action factors before looking for a trade entry. To draw trend lines effectively, you need at least two touches to be able to draw a trend line, but more touches do not guarantee it will hold the next time around. Treat trend lines as areas, use them as guidance for overall analysis, not the law, and don’t force trend lines if there isn’t suitable price movement to apply to it. Trend lines draw through the area where you can get the most amount of touches, meaning the line you draw will hit both wicks and candle bodies depending on the trend you are looking at.
The Key Trendline Trading Strategy No One Talks About
Introduction
If you are a trader or interested in the world of trading, then you must have heard about trend lines. This trading tool is one of the most popular and effective ways to identify the direction of the market and make trading decisions accordingly. However, not many people talk about the effective ways of drawing and using trend lines in their trading strategies. In this article, we will discuss our key trendline trading strategy, which no one talks about, and give you insights on how to draw and use trend lines effectively.
What are Trend Lines?
To start, we must understand what trend lines are. A trend line is a line drawn on a chart that connects the swing highs and swing lows during a trending market. In a downtrend, the trend line connects the swing highs along the top and swing lows along the bottom. In an uptrend, the trend line connects the swing highs along the top and swing lows along the bottom. Trend lines are used to identify the direction of the market and act as a form of support or resistance.
Why Draw Trend Lines?
There are two key reasons for drawing and using trend lines in trading. First, trend lines act as a form of support or resistance. In other words, price often bounces off trend lines, which can help traders determine entry and exit points. Second, a break of a trend line can signal a possible trend change. Therefore, traders can use trend lines to identify potential trend changes and adjust their trading strategies accordingly.
How to Draw Trend Lines Effectively
Drawing trend lines effectively requires some essential concepts to follow. First, you need a minimum of two touches to be able to draw a trend line. The more touches, the better, but more touches do not necessarily guarantee that the trend line will hold. Second, trends do not always move smoothly – they are often choppy and imperfect. Third, treat trend lines as areas, using them as guidance for your overall analysis, not the law. Fourth, do not force trend lines. If they are obvious and help your overall analysis, draw them in, but if not, leave them out.
Ideal Trend Lines
To start drawing ideal trend lines, you must connect the swing highs and swing lows properly. You need to click on your line drawing tool, start from past the first swing high and drag the line down, connecting the two points. You should also extend the trend line further down, in case price makes it back up to the trendline in the future. The last trend line that would have been drawn before the price broke the trend line is best drawn along the higher points.
Imperfect Trend Lines
Imperfect trend lines occur when not all the points touch. In this case, draw your trend line where it can touch the most amount of points and leave out the other points. Imperfect trend lines are common and should not discourage you from using trend lines in your trading strategy.
Wick Ends or Candle Closes
When drawing your trend line, it is essential to draw it in an area where you can get the most amount of touches, meaning the line you draw will hit both wicks and candle bodies depending on the trend you are looking at.
Pairing with Price Action
While trend lines are a useful tool, they should not be used on their own for trade entries. You need to pair trend line breaks or rejections with key price action factors, which we will cover later.
Conclusion
Using trend lines in your trading strategy can be effective, but it requires proper knowledge of how to draw them effectively. We have discussed our key trendline trading strategy and given you insights on how to draw and use trend lines effectively. Remember to pair trend line breaks or rejections with key price action factors before looking for a trade entry. Happy trading!
