Saturday, October 21, 2017

How to Spot Different Strength of Trend Line

February 15, 2017 by  
Filed under Forex FAQ & Latest Post

If you have been reading up on Forex, you will see that trend line forms one of the most important part of trading.

After years of trading, I realize that not all trend line are the same and this is one thing that I have never read anywhere before. Therefore I will like to take this opportunity to share with you guys how to identify different levels of trend line.

1) Number of connected points – The support trend line is drawn by connecting various swing lows while the resistance trend line is drawn by connecting various swing highs.

Therefore the more swings low a support trend line consists of, the stronger it will be and vice versa.

Therefore the strength of the trend line is proportional to the number of connecting points

2) Steepness of the trend line – This is something that no one has ever talked about in their Forex books and courses as this is something that I myself have figured out after years of trading.

From my years of experience, I have figured out that the more gentle a trend line is, the more the price will move after it manages to break through it.

As for steep trend line, you will find that the price will usually stop you out and this is because market tends to retest the trend line one more time before they moves in the direction of the breakout.

As a steeper trend line needs the market to move a lot in order to retest the trend line, it will sometimes cause the price to hit your stop loss.

See the picture below, the price has moved higher than the previous high in order to retest the trend line and this usually stop out a lot of traders.

Moreover, a steep trend line break tends to produce false alarm breakout and this is something you must take note when using trend line.

If you think about it, pivots and Fibonacci are all horizontal support and resistance levels and they are one of the strongest level of support and resistance.

For me, when I see a valid horizontal or gentle trend line break, I will always go for the trade as it has a very high winning percentage.



Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!