01/12/2020
This strategy is a fantastic strategy that is commonly used in forex trading by experienced traders. Trendlines are lines drawn to connect two or more price wave turning points on a chart especially when a trend is formed. It is an important tool for Forex technical analysis of trends.
Trendlines are drawn to link two or more highs (price peaks or inverted V-shape price movement) on a wave to form descending trendlines. They are also drawn to connect two or more lows (price troughs or V-shape price movement) on a wave to form ascending trendlines. Trendlines extends into the future on the chart to act as support or resistance.
Trendlines are used for the analysis of trend on any currency pair and on any time frame. Learning price action is also vital when using the Trendline Breakout Strategy.
Multiple trendlines are drawn on the chart sometimes, especially when price movement cuts across a large time frame. Steep or almost vertical trendlines have a short lifespan.
Technically, many traders use the wick of the candle to draw trendlines, while some use the body of the candle to draw trendlines.
Features
Trendlines form and intersect every now and then. They need to be adjusted more often due to price dynamics.
-The more important a trendline is, the greater the price movement once it is broken or intersected/crossed.
-Important trendlines connect multiple peaks and troughs together and are found in higher time frames such as 1 hr or higher time frames. Lesser time frames are also good but they are noisy (noise is the small random price movement that makes it difficult to identify a trend) at the same time.
-Whenever there is a breakout of a significant trendline, big price movement follows.
-Price intersection/crossing on trendline is important in this type of trading strategy.
-The moment price touches and consolidates around a trendline, then there is a high probability that price will most likely break or intersect/cross that trendline soon.
-When an up moving price crosses a descending trendline and closes above it, there is a high probability that the price will continue to move upwards.
-If a down moving price crosses an ascending trendline and closes below it, it is very likely that the price will continue to move downwards.
