Advantages of Trendline:
Forecasting continued trends and early forecasting of trend reversals. In trading, identifying trends is a mandatory factor, the most basic knowledge but brings accurate proportions. tallest. A trendline or trend line is a straight line that can determine the future price trend. It acts as a support and resistance line to help investors find entry points.
In trading, identifying trends is a mandatory element, the most basic knowledge but brings the highest rate of accuracy. A trendline or trend line is a straight line that can determine the future price trend. It acts as a support and resistance line to help investors find entry points.
Any experienced professional trader uses a trendline as a method to both identify the trend and predict early whether the trend may reverse or not, helping traders orient their trading plan as soon as possible. . This is an indispensable method for every trader.
I. Advantages and disadvantages of Trendline
Forecast continued trend .
Early forecast of trend reversal .
The entry point is when the price returns to the trend, but it needs to be combined with the Japanese Candlestick Model and consider additional support and resistance areas to give a high probability.
In addition, Price Channels are also valuable, and determine the top/bottom of bullish/bearish waves
” When we connect two or more points on the graph together, we will get a trendline. The trendline is the straight line connecting tops to tops and bottoms to bottoms. The more peaks or troughs a trendline passes through, the stronger its resistance becomes. “
II. Use Trendline to identify trends?
1. Forecast the continuing trend.
A bullish trendline or uptrend is a trendline connecting the previous bottom lower than the next bottom.
When the price returns to the upward trendline, you need to identify additional resistance – support areas or candlestick reversal patterns at that time before executing a buy order.
Similar to the bearish trendline:
A bearish trendline or downtrend is a trendline connecting the previous peak higher than the next peak.
When the price returns to the downward trendline, it is necessary to identify additional resistance – support areas or reversal candlestick patterns at that time before executing a sell order.
2. Early prediction of trend reversal.
Forecasting trend reversal from up to down using trendline
Established by higher peaks and higher lows, if the price does not surpass or passes not much compared to the previous peak, it proves that the buyers are weaker than the sellers, there is a high possibility that the price may go sideways. reverse downward.
To confirm the price reversal, you must wait for the price to lick the upward trendline. The price will not go down immediately but may test up one or two more times before going down (in some cases the price retests the trendline, or reaches the peak area, there are In case the price exceeds the peak a little and then reverses, but in most cases the price does not exceed the peak), when the price retests we should sell down. Stop loss above the peak is the most reasonable.
Forecasting a reversal of a downward trend to an upward trend using trendline
Established by lower highs and lower lows, if the price does not fall too much or not much lower than the previous bottom, it proves that the buyers are weaker than the sellers, there is a high possibility that the price may move sideways and then reverse. afternoon goes down.
To confirm the price reversal, we must wait for the price to lick the downward trendline. The price will not increase immediately but may test down one or two more times before increasing. When the price tests again, we should buy up (in some cases). If the price retests the trendline, or reaches the bottom, there are cases where the price drops a little below the bottom and then reverses up, but in most cases the price does not fall below the bottom.) Stop loss at the bottom is reasonable. most.
3. Price channel
The price channel consists of 2 trendlines, one trendline connecting 2 or more old peaks and one trendline connecting 2 or more old bottoms. The more tops/bottoms a trendline connects, the stronger it becomes.
Buy/sell points are areas where the price touches the price channel, but to enter an order, you need to use Candlestick Patterns and past Resistance/Support areas.
Some examples of Trendline and Price Channel:
Above is all the knowledge about trendlines that I have condensed to guide Gold and Forex trading.