The Ultimate Trend Line Trading Guide

[00:01] Tools in trading but the problem is most Traders are still using them completely wrong the most confusing part about trading trend lines is that every Trader seems to draw them differently take this chart for example some Traders might

[00:16] prefer to draw the trend line connecting the Wicks of the candles While others might prefer to draw it connecting the bodies of the candles so which one is correct now even if we figured out how to draw them the next big question is

[00:29] how do we actually trade them should we wait for the price to touch the trend line and enter by anticipating a bounce or should we wait for the price to break the trend line anticipating a trend reversal to short it the truth is I've

[00:43] tried all of these approaches but throughout my trading career I've discovered the best way to trade trend lines which to this day have made me a lot of profit so in this video I'll reveal the best strategy for trading

[00:55] trend lines including an in-depth tutorial on how to actually draw them properly on your chart and by the way I created a free guide that compiles all the trend line strategies from this video into one document inside you'll

[01:08] get a step-by-step blueprint on how to trade these strategies which you can just easily follow for your next trade to access this guide you can grab it inside my free telegram Community the links in the description now let's dive

[01:20] links in the description now let's dive into the video first what is a trend line a trend line is a straight line drawn on a chart that connects two or more swing points in price let's look at an example in this chart we can see that

[01:34] price is fluctuating moving up and down repeatedly so with all these movements happening how can we tell where the market is actually heading simple we draw a trend line by drawing a straight line connecting the swing lows on the

[01:48] chart we can see that the trend line is heading in an upward slope this tells us that despite these short-term fluctuations in price the overall Market trend is up now let's look at the opposite scenario here's another chart

[02:02] again we can see that price is fluctuating moving both up and down however when we apply a trend line This Time connecting the swing highs we can see that the trend line is sloping downwards meaning that despite the

[02:15] short-term fluctuations the overall Market trend is down now a question you might be asking is can't we already tell where the overall Market is heading just by looking at it why do we even need trend lines the answer is simple trend

[02:30] lines do more than just show the trend they also help us spot trade setups that we otherwise wouldn't have spotted if we looked at the charts with the naked eye for example in this chart we've applied a trend line by connecting the swing

[02:42] a trend line by connecting the swing lows now notice that in the past price tends to bounce off the trend line every time it touches it this tells us that in the future if Price ever approaches the trend line again there's a high

[02:54] probability that we can expect another bounce so a possible trade setup here would be to take a Buy trade if price retraces to the trend line now the second reason why trend lines are useful is that if price breaks

[03:09] a trend line it could signal a possible change in Trend direction for example in this chart we've applied a trend line by connecting the swin highs and it clearly shows that the market is in the downtrend but right

[03:23] here price broke above the trend line and soon after the trend shifts from a downtrend to an uptrend knowing this the next time price breaks out of a trend line during the downtrend we could set up a possible Buy

[03:36] trade but keep in mind the examples I showed you are just ideal scenarios in real trading we can't just blindly enter a trade every time price touches or breaks a trend line because these patterns rarely work by themselves we

[03:50] need to combine other Concepts such as price action to increase our chances of getting successful trades which we'll get into later in the video now before first need to know how to actually draw them properly because if you get this

[04:04] wrong the strategies won't work anyway so here's an in-depth guide on how I draw trend lines to draw a trend line we first need to identify something called swing points in the price a swing point is when price moves into an area and

[04:19] is when price moves into an area and then moves away from it for example here we can see that price went down and then reverses back up now this lowest point before the price moves away is called a swing low our job is to find as many of

[04:33] these swing points as possible on the chart and in this case we can see multiple swing lows right here however the key here is to only Mark the swing points that are major and obvious to spot so only Mark the ones that stand

[04:48] out now there needs to be at least two major swing points in order for us to be able to draw a trend line in this case we have more than enough so once you identified them simply draw a straight line connecting them so that's going to

[05:02] be your trend line now a common question people ask when drawing a trend line is the candles or should I draw them touching the bodies of the candles the answer is whichever gets you the most touch points for example looking at this

[05:17] chart if we draw a trend line by touching the Wicks we get a total of three touch points however if we draw it touching the candle bodies we get a total of five touch points so for this spefic spefic chart since the goal is to

[05:31] we'll draw it touching the bodies now an important thing to keep in mind is that trend lines should be treated like areas or zones instead of fixed lines so when drawing them as long as the trend line is still within the

[05:46] general area of the Swing points the trend line is still valid it doesn't matter if you draw it slightly higher like this or slightly lower like this as long as it's still within that area the trend line is still valid so don't over

[05:59] think it too much now if we look at the price action on top we can also see multiple major swing points so let's try drawing a trend line if we draw it like this notice that some swing points overlap

[06:12] the trend line meaning this isn't the right way to do it but if we draw it like this instead notice that the swing points are now touching properly so this is how I'll draw the trend line let's look at another example to make this

[06:26] even clearer again the first step is to identify by Major swing points and here we can immediately see multiple obvious swing points we have multiple swing highs here and multiple swing lows here next we simply draw the trend line by

[06:41] connecting these swing points so this will be our trend line to recap the key to drawing trend lines is simply identifying major swing points and connecting them to get as many touch points as possible and don't worry if

[06:54] because the more you practice drawing them yourself the easier it will get trend lines the right way I'm going to reveal the high win rate strategy that I

[07:06] reveal the high win rate strategy that I use so the way this strategy works is we treat trend lines as key levels let's say you have an existing trend line drawn on a chart now when drawing a trend line we can see that price has

[07:19] bounced from it every time it touches in the past so in the future we could possibly expect another bounce however that doesn't mean we can just enter buy every time price touches the trend line because this pattern won't always work

[07:33] like in this example here you can see that price has rejected the trend line in the past and now it can be seen touching it again so you might expect another bounce however instead of bouncing price instead breaks right

[07:47] through so if you blindly bought at this trend line you would have taken a loss and that's exactly why you need a better approach so here's the strategy I use that's made me a lot of money the first step is is to spot a valid trend line

[08:00] setup like in this chart we can see that price is on an uptrend and we also have swing lows here that we can connect so we can just draw a trend line right here now since the market is in an uptrend we expect the price to bounce off upwards

[08:14] so the only trend line that we need to draw is this one below next I use an indicator called the stochastic to apply it go to the indicator section on your charting platform type in stochastic click this one to apply it on your chart

[08:30] once it's applied we need to change the settings to the custom settings I normally use so go to its settings and just copy these values this will help the indicator give better signals now that all the tools are set we can start

[08:44] looking for entries so what I look for is price want to make sure that the blue stochastic line crosses into the oversold level which is this bottom level here so that would look something

[08:56] like this but keep in mind as I I mentioned earlier we treat trend lines as zones instead of fixed lines this means that price doesn't have to touch the trend line perfectly as long as it's within the zone of the trend line while

[09:09] the stochastic crossed over sold the setup is still valid for our last entry confirmation wait for the stochastic line to cross back inside the oversold levels again so to recap first we want to see

[09:23] price approaching the trend line area next we want to see the stochastic crosses into oversold then crosses back inside again once these signals are met I open a buy position for the risk management we set

[09:37] our stop loss slightly below the swing low in this area and for takeprofit we target two times the size of our stop loss and as you can see price bounced hitting our takeprofit so the key to this strategy is simply using stochastic

[09:52] as extra confirmation for our trade so that we don't blindly enter trades when price touches the trend line let's look at another example in this chart we already have our stochastic with the custom settings applied next we can see

[10:06] an obvious trend line that we can draw at these swing highs so just draw it right there now since the overall trend is heading down the setup we're looking for is price bouncing off this trend line to the downside that's why we only

[10:18] draw the trend line above and didn't need to draw the one below next we wait for price to approach the trend line while the stochastic crosses the overbought line now in this this example notice that the price didn't touch the

[10:31] trend line perfectly and instead slightly broke above it however this still counts as a valid setup because it's still within the trend line zone now an interesting thing about this specific setup is that this area where

[10:45] price touches the trend line also seems to align with a support turned resistance level here this is called Confluence and usually it's a signed bouncing off that key level because of

[10:58] the two key levels converion for the final entry confirmation we wait for the stochastic line to cross back inside the overbought level once that happens we take a short position next we can place a stop loss slightly above the

[11:12] swing High and the take profit at two times the size of our stop loss and as you can see price dropped perfectly and hits our takeprofit now there's actually another trend line strategy that I use and this one can potentially bring in

[11:27] even more profits so let's move on to strategy number two the way this strategy works is simple let's say we have an established trend line during a downtrend normally if price breaks out of a trend line it signals a trend

[11:42] change to an uptrend because a trend line break tells us that the existing downtrend structure has been broken however you can't just blindly enter positions when a trend line breaks because price could form what's called a

[11:55] false breakout this is when price breaks a trend line making you think a trend change is happening but it reverses back down instead if you entered a buy position you'll end up taking a loss now there's actually a way to avoid this so

[12:11] here's the trendline breakout strategy I use that's made me a lot of money the first step of this strategy is to find an existing trend line and in this chart we can see that price is in a downtrend and we have swing points right here that

[12:24] and we have swing points right here that we can connect to draw a trend line next we wait for price to break breakout of that trend line now in order to know whether this breakout is likely a real breakout or a false breakout we need to

[12:36] look for signs that the downtrend is getting weaker and the way I do that is by analyzing Market structure here's how it works in this example price makes a low then it breaks that low forming what's called a lower low shortly after

[12:52] it happens again price breaks the previous low forming another lower low and then once more price breaks the low and forms yet another lower low this shows that price keeps forming lower lows which tells us the downtrend is

[13:06] still strong but now look at what happens before the breakout we notice that price fails to form another lower low and instead forms higher low this tells us that this downtrend structure was already getting weaker before the

[13:20] price broke out another key confirmation is making sure that when price broke out the candle should close well above the trend line because again we treat trend lines as zones so we want to see a strong close above the trend line to

[13:34] confirm that price has actually shifted into an uptrend so this is what I look into an uptrend so this is what I look for before entering a trade now it's that's also followed by a trendline breakout because in this example we see

[13:47] multiple higher lows earlier but since they were not followed by a trendline breakout they were not valid entry points so to recap first we want to see the existing Trend getting weak in this case price shifts from lower low

[14:02] structure to a higher low structure next we wait for price to break out and close well above the trend line once these signals are confirmed we take a buy position for stoploss place it slightly below the trend line rate and set a

[14:18] takeprofit at two times the stop-loss size and as you can see price went up and hits our take-profit Target now let's look at another example again the first step is finding an established trend line in this case it's an uptrend

[14:33] meaning we're looking for a trend change to a downtrend next we identify momentum loss by looking at the market structure and here we can see that price shifted from making higher highs to lower highs signaling that this existing uptrend is

[14:47] getting weaker once this happens we wait for the price to close well below the trend line confirming the trend change and because this is a bearish setup we take a short position next a stop loss could be placed slightly

[15:01] above the trend line break and a takeprofit at two times the stop-loss size and as you can see price went down and hits our takeprofit now if you watch the tutorial this far I assume you're one of the few people who are actually

[15:14] serious about learning how to trade so if you got value from this video and want to learn even more I've put together a free guide that compiles all the trend line strategies from this video into one document inside you'll

[15:26] find a step-by-step guide exactly how to ident identify and trade trend lines you can use this guide as reference whenever you're trading next if you want access to it you can grab it inside my free telegram Community Linked In the

[15:38] description once you've joined head to the files section and the guide will be there I also post market analysis regularly so if you're serious about leveling up your trading skills join the free community I'll see you there