➡️ TRENDLINE STRATEGY
+ TRADER’S HEAVEN LEARNING
What Is a Trendline?
+Trendlines are easily recognizable lines that traders draw on charts to connect a series of prices together or show some data's best fit.
+ The resulting line is then used to give the trader a good idea of the direction in which an investment's value might move.
🛑 HOW TO USE 🛑
+ A trendline is a line drawn over pivot highs or under pivot lows to show the prevailing direction of price.
+ Trendlines are a visual representation of support and resistance in any time frame.
+ They show direction and speed of price, and also describe patterns during periods of price contraction.
+ To create a trendline, an analyst must have at least two points on a price chart.
+Some analysts like to use different time frames such as one minute or five minutes.
+Others look at daily charts or weekly charts. Some analysts put aside time altogether, choosing to view trends based on tick intervals rather than intervals of time.
+ This makes trendlines so universal in usage and appeal is they can be used to help identify trends regardless of the time period, time frame or interval used
🟩 What Do Trendlines Tell You? 🟩
+ The trendline is among the most important tools used by technical analysts. Instead of looking at past business performance or other fundamentals, technical analysts look for trends in price action.
+ A trendline helps technical analysts determine the current direction in market prices.
+ Technical analysts believe the trend is your friend, and identifying this trend is the first step in the process of making a good trade.
☣️ Details with Example ☣️
(please refer example)
+ In this case, trader may choose enter a long position near the trendline and then extend it into the future.
+ If the price action breaches the trendline on the downside, the trader can use that as a signal to close the position. This allows the trader to exit when the trend they are following starts to weaken.
+ Trendlines are, of course, a product of the time period. In the example above, a trader doesn't need to redraw the trendline very often.
+ On a time scale of minutes, however, trendlines and trades may need to be readjusted frequently.
☢️ The Difference Between Trendlines and Channels☢️
+ More than one trendline can be applied to a chart.
+ Traders often use a trendline connecting highs for a period as well as another to connect lows in order to create channels.
+ A channel adds a visual representation of both support and resistance for the time period being analyzed. Similar to a single trendline, traders are looking for a spike or a breakout to take the price action out of the channel.
+ They may use that breach as an exit point or an entry point depending on how they are setting up their trade.
📶 Limitations of a Trendline 📶
+ Trendlines have limitations shared by all charting tools in that they have to be readjusted as more price data comes in.
+A trendline will sometimes last for a long time, but eventually the price action will deviate enough that it needs to be updated.
+ Moreover, traders often choose different data points to connect.
+ For example, some traders will use the lowest lows, while others may only use the lowest closing prices for a period.
+ Last, trendlines applied on smaller timeframes can be volume sensitive.
+ A trendline formed on low volume may easily be broken as volume picks up throughout a session.
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