Showing posts with label trend lines. Show all posts
Showing posts with label trend lines. Show all posts

Trend Lines I ( TL )

A Trend Line is formed by a diagonal line, connecting at least 2 pivot points ( HH or LL ).

I know there are many traders that draw these TL between closing/opening price, but I prefer to draw them by connecting HH/LL. ( with some exceptions when starting with 2 HH/LL and the next taps are fake BO's of the TL ).

So there are many ways of considering an entry using TL.
1. TL's 3rd tap strategy 

Considering an entry by waiting another touch of this TL ( also known as "3rd tap").

If the candle touched the TL and didn't closed below, in our example ( fail to break ), we can open a long position on the next candle open area. SL would be @ previous HL and TP @ previous HH, or Trailing Stop.

For exit you may also use opposite TL broken like in the next example.

2. TL's BO Strategy.

Another common use of trading the TL is to trade the BO.

As you can see in our example, we have 3 opportunities to enter the trade:

Entry 1 - @ retest ( pullback ) of the broken TL.
Entry 2 - @ new formed "HL" of the PA.
Entry 3 - @ the real "HL" of the PA ( since the PA failed to break the HH and formed a LH in top of the chart )

For exit the trade we may consider Trailing Stop or the opposite TL BO.

PA also failed to BO the LL of the chart ( forming a double bottom ) that offer a great exit opportunity. But normally we can use the BO of bearish TL.

3. TL's BO Strategy, following the main trend

Drawing a TL on a higher TF like H1, then lowering the TF to M30, offer us many entry opportunities in the same direction of the main trend.

SL for all those entries might be the BO candle lowest or the last swing HL ( since we have a bullish trend in our example ).

Best Regards,