Trend lines - how to build them and how to use them?
Updated
Before we dive into the world of trend lines, I recommend familiarizing yourself with the support and resistance zone
https://www.tradingview.com/chart/BTCUSDT/nFJAmk2S-Support-and-Resistance-levels/
Here we go:
Trend lines are one of the most universal tools for trading in any market, used in intraday, swing and position trading strategies. Properly drawn on charts, they help to predict the direction of price movement and identify trend reversals.
In addition, trend lines help you to accurately determine the optimal entry and exit points, as well as set a stop loss.
It is recommended not to rely on trend lines alone, but to integrate them with other methods of technical analysis, expanding your trading arsenal.
Often many traders draw too many lines, it is uninformative and useless
How to place trend lines on a chart?
An uptrend is a combination of at least two pullbacks
Similar in a downtrend:
Instructions for markings:
But, let's remember the Axiom:
1. Randomness
2. Coincidence.
3. Regularity
Until a trendline is pushed back a third time - it is considered unconfirmed...
Once the third bounce has occurred, the line can be considered valid, but does not guarantee that it will necessarily bounce the fourth time!
Like all patterns in the market, trend patterns can be drawn on any timeframe, also - they are more effective on older ones (as well as all others)
How to use trend lines in your trading?
Frequent trades from a trend line are rebound or breakout trades
Example:
Trendline confirmed (bounced three times) - on the fourth approach we can pay attention - what happens next? Price will either bounce from our trendline again or there will be a breakout
Next example:
How can we determine whether there will be a breakout or a bounce? As I said before, you need to take into account the context: indicators, price action, nearby levels and so on (it all depends on your psychology)
How do trend lines fit together?
Support and resistance levels are areas on a chart that indicate potential pressure (on a side)
The same principle applies to trend lines. The only difference is that trend lines are sloped rather than horizontal.
How to properly label/draw trend lines?
Which trend lines are important and which ones should be ignored?
Important clarification - trend lines represent a support zone, not specific levels.
How can you use trend lines?
The trend is our friend. Where the trend goes, so goes we. Trading against the trend is foolish. If you do decide to do it, it must be justified!
Trend lines are the direction of the current market.
Also the trend line itself can be divided into two positions:
Trend Lines Entry Point:
Like all other patterns in technical analysis or price action - trend lines can help you find a more favorable entry point in terms of risk-to-reward ratio
How to use a trend line to identify a market reversal?
Chances are you have encountered this before. There is a trend line breakout, you are already expecting a trend reversal, but the market continues its original movement
Like all indicators/patterns - not a panacea. Each strategy has its own risks, just when we add other osnovnopologologayuschih signs to one strategy, the chance of risking a loss - decreases!
Technique for determining a trend reversal:
If the price breaks the previous minimum/maximum, most likely the trend will go in the direction of the breakdown...
https://www.tradingview.com/chart/BTCUSDT/nFJAmk2S-Support-and-Resistance-levels/
Here we go:
Trend lines are one of the most universal tools for trading in any market, used in intraday, swing and position trading strategies. Properly drawn on charts, they help to predict the direction of price movement and identify trend reversals.
In addition, trend lines help you to accurately determine the optimal entry and exit points, as well as set a stop loss.
It is recommended not to rely on trend lines alone, but to integrate them with other methods of technical analysis, expanding your trading arsenal.
Often many traders draw too many lines, it is uninformative and useless
How to place trend lines on a chart?
An uptrend is a combination of at least two pullbacks
Similar in a downtrend:
Instructions for markings:
- Find at least two points on the chart
- Connect them with a line
But, let's remember the Axiom:
1. Randomness
2. Coincidence.
3. Regularity
Until a trendline is pushed back a third time - it is considered unconfirmed...
Once the third bounce has occurred, the line can be considered valid, but does not guarantee that it will necessarily bounce the fourth time!
Like all patterns in the market, trend patterns can be drawn on any timeframe, also - they are more effective on older ones (as well as all others)
How to use trend lines in your trading?
Frequent trades from a trend line are rebound or breakout trades
Example:
Trendline confirmed (bounced three times) - on the fourth approach we can pay attention - what happens next? Price will either bounce from our trendline again or there will be a breakout
Next example:
How can we determine whether there will be a breakout or a bounce? As I said before, you need to take into account the context: indicators, price action, nearby levels and so on (it all depends on your psychology)
How do trend lines fit together?
Support and resistance levels are areas on a chart that indicate potential pressure (on a side)
The same principle applies to trend lines. The only difference is that trend lines are sloped rather than horizontal.
How to properly label/draw trend lines?
Which trend lines are important and which ones should be ignored?
- Focus only on the major pivot points
- Connect at least two major pivot points.
- Adjust the slope of the line to get the most amount of price touching the line, whether it is the shadows of candles or their bodies.
Important clarification - trend lines represent a support zone, not specific levels.
How can you use trend lines?
The trend is our friend. Where the trend goes, so goes we. Trading against the trend is foolish. If you do decide to do it, it must be justified!
Trend lines are the direction of the current market.
Also the trend line itself can be divided into two positions:
- If the trend becomes flatter, it means that the market is moving into a state of consolidation
- If the trend is becoming steeper, it means that the trend is getting stronger (or perhaps it is reaching its climax and is approaching its final stage).
Trend Lines Entry Point:
Like all other patterns in technical analysis or price action - trend lines can help you find a more favorable entry point in terms of risk-to-reward ratio
How to use a trend line to identify a market reversal?
Chances are you have encountered this before. There is a trend line breakout, you are already expecting a trend reversal, but the market continues its original movement
Like all indicators/patterns - not a panacea. Each strategy has its own risks, just when we add other osnovnopologologayuschih signs to one strategy, the chance of risking a loss - decreases!
Technique for determining a trend reversal:
- Wait for a trend breakout
- Wait for a lower low/maximum to form.
If the price breaks the previous minimum/maximum, most likely the trend will go in the direction of the breakdown...
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A great example from the theoryTrade active
A good example with a bounce from the trendline to the first targetTrade active
That's a great double example!Trade active
Good pricing, if the price goes according to this plan, you can expect something like thisTrade active
Given the circumstances, we could have executed at least one strong, confident trade within this trend.However, we had the option to wait for the breakdown and trade from the retest, which is often considered the most reliable approach. As I've mentioned before, it's essential to remember that relying solely on the trend is not always foolproof.
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A retest of the uptrend is anticipated in the near future. Your strategy should hinge upon observing the market's reaction, ensuring to await a genuine breakdown or retest before making any moves.Trade active
Also, great exampleTrade active
Another example of a good trendTrade active
Price action analysis is the cornerstone of fundamental chart analysis, focusing solely on candlestick patterns. It embodies an entire art form that delves into the intricacies of psychology and strategic maneuvering.Moreover, it is extremely important to regularly switch to lower time frames to effectively gauge the market reaction and determine a favorable risk-reward ratio.
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Break of the downtrend and rebound from the last support zoneTrade active
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An excellent example of a confirmed uptrend followed by a breakout and retestTrade active
A great example of recent workComment
To uncover genuine trading opportunities rather than mere remnants, one must devote considerable time to meticulous analysis of the charts.Trade active
Excellent example with trend support and consolidation before breaking resistanceTrade active
A great area to look for setups into long positionsTrade active
After breaking through support and trading above it, we formed a downward trend, subsequently broke through it, fixed ourselves with a candle above and continued to growTrade active
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