Learn this powerful Fibonacci Retracement method FREE that pulls 500+ pips per trade. Download this 1 Minute Forex Trading System FREE that makes money anytime instantly. Master these Candlestick Patterns with this FREE 82 page FREE PDF Candlestick Guide. Trendlines are one of the most basic and easiest technical analysis tools that any trader learns to use from the very start of his or her trading career. A trendline with a positive slope indicates an uptrend and a trendline with a negative slope indicates a down trend.
Now, you can draw the trendline yourself. However, most of the trading software can draw the trendlines for you automatically so you don’t need to do much. Drawing trendlines is always a subjective matter. It looks obvious but sometimes, you can question the placement of the trendline. But don’t worry too much about it when you use this method.
One of the most powerful methods of trading trends is combining trendlines one of the most basic tools in technical with trending candlestick patterns that signal that a trend in place will continue. You can use this combination to decide when to buy and enter a long position or when you should stick with the trend to realize additional profits.
Because trendlines are so useful for trend confirmation, you can trade with confidence when you use the combination of bullish trendlines with bullish candlestick trending patterns. This combination can tell you when to stick with an existing position and when to initiate a new position.
For example, the trendline has a positive slope meaning there is an uptrend. If you spot a trend confirmation candlestick pattern, it means that you can continue in that position for additional profits. When you spot the trend reversal candlestick pattern, you should take it as a signal that the trend is about to reverse itself and this is the best time to get out of the trend. You can use two stick candlestick patterns and even three stick candlestick patterns for example the bullish neckline pattern or the bullish thrusting line pattern and others.
Now as said before, in addition to confirming trends and letting you know when to get in on a long trade, this combination of trendlines and candlestick patterns can also help you to decide when it is the best time to get out of a trade.
How to exit with a trendline? Trendlines keep changing everyday! The first way to go about it is to draw a support trendline daily and place an appropriate stop loss that is good for that trade. This is a good stop loss exit strategy as the trendlines move with the trend, your stop loss exit also moves daily. The second method is to exit if the closing price is lower than the trendline. However, the first method is far more superior.