The use of trend lines is very common among amateur traders.
Trend lines can give you a guide for entries and exits while trading within a trend.
Many inexperienced traders will plot trend lines wherever they can make the highs or lows of the price connect.
While this may seem plausible, they do this without any confluence and trade blindly off these lines.
However, with no plan of how to trade a touch or break of the line, such traders find themselves in a losing strategy.
Use this video to know the correct application of trend lines, but never trade a trend line without confluence.
The use of trend lines is very common among amateur traders.
Trend lines can give you a guide for entries and exits while trading within a trend.
Many inexperienced traders will plot trend lines wherever they can make the highs or lows of the price connect.
While this may seem plausible, they do this without any confluence and trade blindly off these lines.
However, with no plan of how to trade a touch or break of the line, such traders find themselves in a losing strategy.
Use this video to know the correct application of trend lines, but never trade a trend line without confluence.
Key Points of the Lesson
UTILITY
Useful to determine the strength of a move.
Determine a possible trend reversal ⇒ three trend line break.
Can be used across all markets.
IMPLEMENTATION
Requires 3 touches to confirm the trendline.
Breakdown/breakout from the trend line ⇒ take profit on current positions, possibly enter reverse trade.
Low time frame trend line ⇒ use 15-minute candles.
High time frame trend line ⇒ use daily closes.
PRACTICAL EXAMPLE
The 4th touch of a trendline can become a crowded trade. A lot of people notice the trendline now so we can expect the opposite reaction.
THREE TREND LINE FAN BREAK
Three consecutive trend lines breaking with a change in market structure.
The third trend line break can confirm a trend reversal.
Context-dependent ⇒ combine with other factors and technical analysis.
PRACTICAL EXAMPLE - THREE TREND LINE FAN BREAK
TIPS & TRICKS GANN THEORY
Gann theory
Healthy trend ⇒ should have a 45- degree angle
Parabolic trend ⇒ significantly steeper than 45 degrees, when broken we can expect a large retracement.
Flat trend ⇒ significantly less than 45 degrees, weak.
Internal Trend line
Useful in high time frame analysis.
Drawn through price action, connecting as many highs and lows as possible.
Fourth touch of a trendline might be a “crowded’ trade ⇒ possibly breaks
Breakdown/breakout from a trend line should occur with an increase in volume.
Use confluence to increase the probabilities for your trade setups.
TAKE HOME MESSAGE
Three touches confirm a trend line
Trend reversal possible upon three line fan break.
Angle and volume are important.