Top 10.  PRO tips for using trendlines in FOREX

  • Trade in the direction of trendline. Trade long while trendline slopes upwards, trade short when it slopes downwards. If you find channel (range, price belt), trade long on upper limit, trade short on bottom limit. This will be strong base for anything you do with forex trendlines.

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  • Trendlines are support and resistance zones in forex. In uptrend, it is recommended to buy when price touches support (bottom trendline). Do not sell against uptrend, wait for its exhaustion if you want to trade against it. In downtrend, sell at upper trendline (resistance)

  • Consider slope of the trendline. Trendline that is too steep is unstable and may reverse without a warning. Consider the slope of forex trendline in comparison to horizontal axis on the market. When the trend becomes to steep it often times exhausts winning group of traders. It can be compared to a sprint that cannot last for a long ditance. Steep trend slope often times lead to ranging market or complete trend reversal. Consider creating a trading diary comparing trendline slopes. Steep trendline breakout may be a good opportunity to enter counter trend trade.

 

  • Price often times test already broken trendlines, after test previously broken support for uptrend might become resistance for price, and vice versa.

  • Do not draw just single trendlines. Complete the trend tunnel by adding parallel line at opposing side of the market. By creating tunnel you will be able to improve your position timing both on entry and position exit.

  • Trendline breakout signalizes potential trend reversal. Look for support breakout in uptrend (bottom trendline) and upper trendline breakout (resistance) in downtrend.

Uptrend in 1 H timeframe, is part of the trading range in daily chart (picture below).

  • Realize that market might be in range and trending at the same time. Thanks to fractal geometry of the market, ability to identify trend depends on timeframe that you are looking at. What might be valid trend on your current timeframe might be just swing in the range on higher timeframe. However, do not overanalyse. Look for confluences on higher timeframes (one or two timeframes above). If in doubt, consider market to be ranging and wait for clearer picture.

  • Always look for massive trendlines (supports/resistance) zones at higher timeframes before entering the position. Often times can you find massive (S/R), that could bring strong trend, together with your position to the halt.

  • Consider timeframe and length of trendlines.  The longer the trendline the more valid it becomes, the more valid it becomes, more traders jump into the trend. More traders jump into the trend, more stable it becomes. Do not forget, even market makers cannot fight masses jumping into the trend.

 

  • Consider and compare volumes within trend tunnel. Healthy trend: Average volume grows on swings in the direction of trend and it decreases on corrections against the trend.

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