Here’s a live example on how we apply the Trend Line for taking trades… the third chart shows the Usd Jpy daily time frame…We see the trend line drawn as said in the little write up [ABCD points shown], and now we see price coming back up to test the TL days after…
Also notice that price stalled for a while at the TL [yesterday’s candle], showing its a resistant point.[ Please note that resistant point does not necessarily indicate that price will fall…Resistant points/zones can be broken…[such as is likely to happen here on the chart shown.
Now, our TL shows us that we should be careful of going short and be on the sideline for price to decide what it wants to do…
If today’s candle closes above the TL, [the open is above the TL], then we say the TL is broken…[this also does not necessarily indicate a long position, but the balance is more towards a long position and aggressive traders will go long at this point].
The less aggressive traders will do other things among which are.
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wait for price to travel up, then retrace…they pick their trades at the end
of the retrace[using various tools to guessticulate the end of the
retrace] …a strategy known as BOP…brakeout and pull back.
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Go to a lower time frame and look for signals to go long…patterns,
candle formations, Fib retracement, 123 reversal/continuation pattern,
EMA cross over, etc.
This brings us to the 2nd chart …4hr time frame…
As seen, price broke all the 3 TL’s…inner, outer, long term TL… Thus indicating a strong bullish run…now if the daily candle opens and close above the daily TL, we’ll look to go long…and one of our criteria will be to watch or wait for a pull back of the recent up wave on the 4hr chart, and we’ll be using the fib retracement tool and reversal candle formation to gauge our retracement and determine when to pull the trigger…
The 1st chat shows the 1hr tf where i’ve pulled the fib retracement tool on the present long wave…might still go higher than it is now,which if it does i’ll keep adjusting the fib tool…my aim here is to measure the retracement…
I use the 1hr so as to get in a little bit earlier than i should on 4hr…
Will keep explaining as action unfolds on this pair…
At this point, I’ll like to emphasise that while it is good to anticipate price movement and have a plan like we do now, it cannot be over emphasized that A trader should trade what he/she sees and not what he/she expects…
Happy Pipping