Trend lines are simple trading tools that do wonders in technical trading. Moreover, they provide reliable
support or resistance to the price-action. Apart from the common ways most technical traders use them,
there are more advanced trend lines trading strategies.
Ways To Draw Trend lines
First, how do traders draw their trend lines?
There are many ways one can draw a trend line.
1/ Connecting a high and higher high.
2/ Connecting a low and lower low.
3/ Connecting a low and higher low.
4/ Connecting a high and lower high.
5/ Connecting any high to any low.
6/ Connecting a unique low to many lows or highs in view to generate various trend lines from that low.
7/ Similarly, one can connect a high to other highs or lows to create a ray of multiple trend lines.
Trend lines Trading Strategies
1/ One can use the intersection between a trend line and horizontal support or resistance level as a hot
spot trading zone.
3/ The projection of a trend line using the angle between two trend lines in view to identify support or
resistance levels and possible reversal points.
4/ Using a dynamic trend line to trade the short term consolidations around
a rising or declining trend line.
5/ Pinpointing and trading valid breakouts above or below a dynamic trend line.
6/ Buying at the retest of a rising trend line after the price forms a new higher high.
7/ Selling at the retest of a declining trend line after the price forms a new lower low.
8/ Drawing the median line of two diverging trend lines in view to trade along it like
9/ Higher Times frame Trend lines
It consists of drawing trend lines on any higher time frame then switch to a lower time
frame to trade around them. Though, one may use any higher time frame, we recommend
that traders use the quarterly or yearly chart.
One may use that trend line strategy for scalping or day trading purposes.
Trend lines And Moving Averages
Technical traders adore moving averages because they are simple and often reflect the
trend (with their slopes). However, one can replace them with trend lines. For example
if a financial instrument is bullish, the moving average eight will be above the moving
average twenty, the MA 20 is also above the moving fifty. Practically, one may substitute
the MA 8 with the common sense trend line. One can also replace the MA 20 with the median
line of an average (normal) size channel in which the price is confined. Finally, the substitute
for the moving average fifty is the lower trend line of that average size channel. Furthermore,
if one projects that rising channel one time below, the median line of that projected channel
may be the substitute for the moving hundred. In this instance, its lower trend line will be the
substitute for the moving average two hundreds.
Sometimes, those substitutions may not make any sense at all due a consolidation or market
volatility. However, in normal conditions and during a bullish trend those substitutions make sense.