How to trade trend line
How to trade trend line
How to trade trend linehttp://www.eminidaytrader.net
In trading, it is important to develop a strategy that will give you an idea which direction the market is heading. One of the simplest yet effective ways to check the direction of the market is to use trend line. Basically, trend line shows the direction of the market by connecting two points of previous reaction high or connecting two points of previous reaction low. Trend lines are drawn on a chart to determine directions. Once the direction is drawn the trend can be determine.
The trend line can be drawn on many different time frames. Trend lines can be drawn on a monthly, weekly, daily, intraday chart or tick chart. Trend line will help trader know when to enter the market or when to exit the market. There are many different types of trend line. When a trend line is connected from the top of two previous reactions high and connected with two previous reaction low, it has established a channel. The channel can be an uptrend channel or a downtrend channel. Channel is also known as continuation pattern.
If a trader decides to go long on an uptrend he would buy at the bottom of the trend line and if the trader decides to short he would buy at the top of the trend line. This is also known as support and resistance trading. Traders believe that trend line give the market some type of continuation to go upward or downward. The probability of the trend line succeeding depends if it can continue on the trend. Sometime a trend may exhaust and reverse. This happens when the trend line break and the trend can no longer continue.
Trading a trend line break can give trader the signal of a trend reversal. Trend line break normally is a stop of a continuation and exhaustion. For example, if an uptrend line break, it is an exhaustion of buying and sellers are looking to exit to market to capture profit and if a bottom trend line break it is an exhaustion of sellers and buyers are looking to step back into the market. Trading is type of strategy has a high probability as many professional are looking at these trend line support and resistance.
In technical analysis trading, traders expect that a trend line will continue. Sometimes the continuation can last for a few hours in an intraday chart or months on a daily chart. Trend line is one of the price actions that is widely followed by the general population of traders. Trading trend line gives traders a useful insight and expectation of price action. Price action should be use in conjunction with trend line and together can increase the odds of success. Trading trend line is one of the strategies of many different strategies. Whatever the strategy are, trade at your own risk and use careful judgment when trading.
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