TREND LINE TRADING TIPS/HACKS

Trend lines are an essential aspect of technical analysis. They are used to identify the market’s current trend. I mean, what are you trading if you do not know where the price is headed next? Trend lines have been a significant aspect of my trading style, I have been using it for quite some time now. And here are some tips I would love to share if you are just starting out as a Trader;

1. Always ensure that your trend line is drawn touching the wicks of the candlesticks, not the body. This helps filter out market manipulation and also prevents you from entering the market too soon.

2. The higher the time frame the more reliable the trend line is. The higher time frame is a collation of what’s happening per second, per minute, and per hour in the market. Using the higher time frame gives you an edge because you are working with more data. And this is what financial trading is about, price data and history. The more the data to back you up, the more reliable your information is. The same goes for plotting trend lines. You get the gist right? More data evidence equals more reliability. I recommend drawing your trend lines on the daily, 4hr, or 1hr time frame.

3. Always draw a new trend line after a trend line breach. A trend line breach is when price closes significantly above the trend line in a downtrend or significantly below the trend line in an uptrend. Remember, the market dictates and we follow.

4. The third touch of the trend line always does the trick! For example, when you draw a trend line in an uptrend, you connect two successive lows and extend the line. Once price comes back to retest the trend line you’ve drawn and bounces off it the third time, this signifies your trendline is reliable and the upward movement after this third touch lasts longer than the previous ones.