Trendlines, construction and trade on trend lines - that it is dedicated to today's video tutorial of the series on Price Action materials, that is trade without indicators.This post is aimed primarily at beginners, but, perhaps, the old bristly forex traders will find for yourself something useful
Trend lines are widely used by traders to find entry and exit points, as theycan serve as an indicator of changing trends or trend.If the trend line to build correctly, it will be a very accurate instrument, indicating the future direction of the movement of the course.However, a large number of traders, especially beginners, make elementary mistakes and build a trend line is not true.
How do we draw them?
trend line must connect as much as possible the grounds (at least two) - this is for the growing market.And going down, respectively, we will connect the top.As it happens easier to show in practice.In MetaTrader there is an appropriate tool for drawing trend lines.Click the arrow for the
We show some cross-hairs, and under it a little bit to the right is an image line.
To draw a trend line, we need to first base for the rising market and then we connect the next local minima.
In the graph we see right after a textbook example of a clear and explicit.We move the mouse cross hairs on first base and have him hold the line so that it connected as much as possible points - the following reason.Those.points at which tried to drop a candle.But this has not happened, and continued upward movement.We obtain here such a line (see. Chart above).It should not necessarily ideal to connect our points.Somewhere she can get out some candles tails.This is normal, because we are more interested in the question of fidelity predictions of future actions of the trend, rather than lines of beauty.The trend line shows us the kind of bar, a floor, on which the price bounces off periodically and continues upward trend.As we can see further up trend is increasing.Price greatly moved by our drawing a line, but, nevertheless, continued to swirl around her for some time.Over time, we see that the trend lines are obsolete, and we need to draw new ones.
Let us now try to draw a trend line for a bear market.On the base, we have joined a growing market, but here we will connect local maxima, which are gradually lowered, thus creating a falling market.Move the mouse over our first local maximum in order to draw a trend line, and connect the next local maxima, which appeared on the chart.
Thus, we have a trend line for the bear market and drew it.As you can see, after some time there is a situation in which the trend line will be not as important as it was originally important.Just as in the first case, this market has risen up much stronger, and for some time to return to the trend line does not occur.And then ... the trend line simply outdated.But nevertheless, when the market went up, we can draw another trend line exactly the same way as the first, but at a different site.Let's demonstrate this.We have new higher base, which gave us the opportunity to draw a line to another over a short period.
It would look something like this (see. Chart above).It called such a picture on the chart: "A secondary trend line."Those.we first drew our top line, and then the market has moved into a strong growth, and we were able to draw a secondary trend line, which was the actual very long.But, nevertheless, if it continues to move up, our secondary trend line would play an important role.Do not try to do everything for some instructions on some piece of paper.Common sense no one has canceled.In the construction of trend lines should take into account how the market reacts.Those.we try to find those places where it bounced, try to find a platform, a certain line of floor, as I said, by which the market rebounds.It is also worth mentioning that the trend lines may be different.It all depends on what time period we are interested in, ieHow long we will keep the position if expressed in a number of candles.Since at absolutely any timeframes lines constructing the rules remain the same.Those.we can look for some small trends, and we can look for some significant, which have a greater length.
For example, here (see. Chart above) we had a very small short bearish trend.And we could draw a trend line, if traded on this interval.Draw a trend line.For example, here we can draw a small trendline down, but we still have a long-term trend is up, we could draw a given line.
uptrend, as we can see, save a lot longer than our little downward trend, and it is compared to our longer-term uptrend it is just correction and return to greater extent the trend line, but no more.Again, it all depends on the period in which we trade.If you trade for some ten candles, then you would be more important at the moment the downward trend.And if you are using some kind of a wide gap in their trade, then, respectively, you'd paid more attention to it long-term trends.
How to use trendlines to trade?
Suppose you draw a trend line.What to do with it next?Firstly, the trend line acts as a good support zone, i.e.area from which price theory and most likely alienate the presence of a stable trend.In this area support line breaks can be quite a deal.Let's look to rebound from the line, ie,a situation in which the price returns to the trendline, and then again from her bounce that can be regarded as a signal to continue the trend and open the appropriate position.For example, on the same schedule we have the price went down, and then went back to the trend line.The basic schedule we had not yet be drawn, the line, and we have built a few below, and then have it adjusted.
We drew the pin bar that could be interpreted as a rebound from the trend line and the open position for sale.
And here we have (see. Figure above), as the price goes back to the trend line.There is an obvious rebound, as the candle is directed towards our bearish trend.And here again, it would be able to sell if the price went up to the trendline, but the candle is our opposite trend.For example, the trend in our example goes down, and the candle is bullish, and she came close to the trend line.Provided that our candle had just closed, should we sell now?No.It is necessary to wait for the confirmation signal when the candle is drawn in the direction of our trend.In this case, it drew bearish candle.In the hope that the trend continues, we can sell.
In addition there is a strategy of trade on trend lines, as a sample, when the price breaks the trend line in the opposite direction of our trend.And, accordingly, there is a reversal.We show this with an example.We had a breakdown of the trend line.In the beginning we draw our line.The graph shows clearly where was our trend line, and in addition to the actual breakdown, visible and false.
There has been a breakdown.But the spark that had just broken through the trend line to enter the market is not worth it.It is necessary to wait for another candle to confirm that the signal is correct, and it is not a false breakdown.In the graph we see breakout candle trendline.We are waiting for another candle.There was a bullish candle, but we still do not sell, and are waiting for what will happen next.And we see that the price has returned to a value above the trend line, and the upward trend continued.In this case, it can be regarded as a rebound from the trend line.And sometime after this candle (see. Chart above), after confirmation of the trend can be purchased.Again, this is about a rebound.
We had a sample (see. Chart above.)The price has broken the trend line.But we are waiting for another candle to confirm.And it is again bearish, indicating a reversal.And in this case, we might sell, as there is confidence that all take-profits would have been taken due to a reversal.Important: after the break of the trend line there are two possible scenarios: either a reversal or a continuation of the consolidation before the market, as happened in our case.
The graph drawn trend line.We see an upward trend, and its breakdown.Drawn bearish candle that has broken trend line, then appeared bullish candle.We expect that will continue.Then again drew a bear with a tail up, which should serve as a signal to us to what should be sold.Of course, it all depends on your intended goals and your projections for the duration of the movement trend downwards.Again, it should pay attention to other technical indicators, chart patterns, areas of support / resistance, etc.
In this case, we have the chart there was some consolidation, some correction, which resulted in a chaotic, almost horizontal set of candles, which is then returned to a bullish trend.And the bull trend continued.That is, we are seeing consolidation before resuming the trend, rather than a reversal after the break.
Is a trend line break signal to the market reversal, or a signal to the consolidation?
actually determine in advance is very difficult, or rather impossible.But we can make some judgments on the basis of the angle of the trend line.The steeper the angle of inclination at the trend line, the greater the likelihood that after the breakdown followed by consolidation rather than reversal.Accordingly, the steeper trend, the greater the likelihood that it will break at some period of time, and then continue.
But if the line is smoother, has a greater extent, for example, as in the chart above (we see that the trend is down lasted quite a large number of candles), after its breakdown, we have reason to believe that this is a signal for a reversalwhat actually happened in this case.But, unfortunately, it is not always so simple.In addition to the trend lines should take into account other signals.Once the trend line was broken, it does not mean that it should be removed from the schedule, because it can still render us a service.As you probably noticed, the trend lines that we draw, automatically continue in the future, helping us to put them on the basis of some kind of purpose, feet, as well as in finding potential future areas of support and resistance.Let's look at an example of when not to be removed from the chart, it would seem, has lost its relevance trendline.
What we see in this case?The graph shows a definite trend line.Next we see her breakdown, and that after the breakdown of the price returned back to the trend line to test it.The trend line we had with bullish trend.It is the support on which the price is not once bounced.Once the price has broken through it, the trend line for a short time becomes resistance.Price, as a rule, tends to return it to then continue their opposite movement.In this case, the price broke our bullish trend line, and then it came back and almost touched her tails, thereby testing the trend, as the resistance.After that, there was a slight zig-zag motion, in which the end of the price decided to go down.
Important: once the trend line was broken, do not rush to remove it.Perhaps the price will return to it, and you will thus determine that this reversal pattern.Of course, provided that the price trend of the line push off, and it does not break and again continue the trend that has been before.Naturally, the greater the length, the greater the number of bases or highs connects trendline, the more important is this trend line.Also important is the number of touches: the number of times the price is repelled from the line, and the angle of the line.The more gently sloping trend line we have seen, so it is more important .chem steeper angle of the trend line is, the greater the likelihood that it will be broken and so it is less reliable for us.Trend line can also be used as the support to move the zone.
Suppose there somewhere you have made a deal to buy.Then gradually shift your stop loss just below the trend line, and with each candle move it.It turns out a kind of analogue tralling stop.Tralling stop - an order to close a position, which automatically changes the trading terminal, in accordance with the specified settings trader.It allows you to automate the process of trading in terms of closing the position.
At the end
And finally, let's look at how all the same to determine what the price will be the minimum distance after the breakthrough trend line, because if it will turn, the price of course can be a very long time.We also need to have some minimal initial goals, which will work with a high probability.In the graph we can see the trend line, and the price continues to rebound from the line.Then we see the breakdown occurred, and has its confirmation, and the open position.
Open position somewhere at this point (see. Chart above).Now we need to set a goal?Decide how to assign take profit.This can be done with our previous trend line.Look, what is the maximum vertical distance from the trendline to the base or to the maximum, if the bullish trend line would be.Passed by the price trend line.This is the distance in points and will be our first target potential.
In this case, here we have the maximum distance was 410 points.
At this stage we bought.Lay off our 410 points, which were taken after a short growth and correction.
for this trend line measuring the maximum vertical distance (from high to the trend line).The distance is found to be 260 points, and postpone them, we immediately after the break line.
What do we see?When driving down was just a maximum of 300 points.That is our goal would be quite worked.
The graph above the maximum vertical distance from the highest point to the trend line was 370 points.We sell after the break, so postponing the 370 points as the target.
Here we see that they worked well.