HOW TO DRAW TRENDLINES
- For a market in a downtrend, price will be forming peaks of decreasing height. Its these decreasing height peaks that you need to use to draw the downward trendline.
- For downward trendlines you connect a minimum of two lower swing highs and draw a line and that forms your downward trendline.
- For a market in an uptrend, price will be forming low of increasing heights. There are the lows that you use to draw upward trendline.
- So you need to connect at least two higher swing lows and you would have an upward trendline.
- Click this link if you wan’t to know more about how to draw trend lines.
- When you see price breaks a trendline, it is usually an early signal that a trend may be changing. So will wait for the candlestick close below or above a trendline before you place your order.
- For the buying and selling rules below, refer to this chart.
- Trendline break forex trading strategy
SELLING RULES
- The market will be in a uptrend and you have to find two points to draw a rising trendline
- Wait for price to intersect this trendline and make sure the intersecting candlestick closes below it.
- Next thing you do is to place a pending sell stop order 2-3 below the low of the candlestick
- For you stop loss, place it 2-5 pips above the high of that intersecting candlestick
- You can set a profit target on previous swing low or you can exit your trade when the the opposite trendline is intersected and breached.
BUYING RULES
- The market will be in a downtrend and you have to find two points to draw a falling/downward trendline
- Wait for price to intersect this trendline and make sure the intersecting candlestick closes above it.
- Next thing you do is to place a pending buy stop order 2-3 above the high of the candlestick that intersected the trendline and closed above it.
- For you stop loss, place it 2-5 pips below the low of that intersecting candlestick
- You can set a profit target on previous swing high or you can exit your trade when the the opposite trendline is intersected and breached.
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