A trendline is a line that you draw above or below pivot high or lows. To indicate the price’s primary direction. Support and resistance in any time frame (TF) are represented by visually by trendlines. The depict patterns during times of the contraction and show the direction and the pace of the price. Trendlines play a significant role in the market. I always tell my students to go and study how to identify and draw a trendline correct. So many people will ask what is a trendline here is a link of a video where I talk about trendlines. In this article you will learn what a trendline is and how to use it in trading. https://www.youtube.com/channel/UCEuc7IYRMZOckphv12N6FPg
Why is a trendline very important
We have traders international and trade different things, some traders are trading using price action (PA), we support and resistance and trendlines, head and shoulders you can name them.. We have traders who trade trendlines only and the use it to their advantage when they confirm the direction of the market. When a trader spot a trendline they patiently wait for the 3rd touch to buy or sell depending in the direction of the market. I personally recommend beginners to pay attention to trendlines and learn how to use it so that they can be profitable so quickly. Get my eBook you will learn more about PA Forex Secret For Beginners
How to draw a trendline
The chart below shows an example of a trendline in a downtrend.
The picture above shows downtrend trend line, in a downtrend you need to join two higher lows(HL) to form a trend line. Now you don’t anything other than waiting for the price to go back to the Trend line.
The below picture shows an example of a trend line in a uptrend
The picture above shows an uptrend trend line, in a uptrend you need to join two lower high(LH) to form a trend line. Now you don’t anything other than waiting for the price to go back to the Trend line.
How to trade trendlines
A trend line is confirmed with two touches then you wait for the third touch. You can buy if it is an uptrend and sell if it is a downtrend. Once the price return to the trendline to make the third touch, that is when you gonna take a trade. I f the price did not touch the trend line don’t take a trade. Let us check the picture below
You can see the above picture. A trendline was formed and it was successful with 3 touches. You sell on the third touch and put your stop loss above.
As you can see the above picture of a trendline with full 3 touches as I said you buy on the third touch.