If you are familiar with support and resistance (the most basic form of technical analysis) it is very easy to understand trend lines. Trend lines act exactly as the traditional support and resistance do, the only difference is that support and resistance are drawn in horizontal lines while trend lines are drawn in a diagonal form. There is no difference in them whatsoever except the direction of the line drawn. Let me help you understand it better with the help of a chart.
How To Draw Trend Lines
I hope the concept of the trend lines has become more clear with this example so now let us move on to one of the most asked questions about trend lines. How to draw them ? and believe me it is quite easy. There are many easy to draw trend lines and every trader will have his own way, from drawing the trend lines on the swing candles to drawing at candle closing points. For a trend line to be considered valid it should touch at least three points. Today I will show you how to draw tend lines using swing points.
What Are Swing Points
So let us understand the swing points first. There are basically two types of swing points, swing low and swing high. A swing low point is formed when a point has two consecutive higher lows to the left and two consecutive higher lows to the right, similarly a swing high point is formed when it has two consecutive Lower highs to the left and two consecutive Lower highs to the right and trend line must be drawn through these swing points.
How To Trade Trend Lines
So here it is, a very simple and extremely effective way of drawing a trend line but how should one trade it ? Where to take entry ? where to set the stop loss and where to take profit. I will help you answer each one of these questions next.
Trading a trend line is quite simple and straightforward. You will have to watch out for at least two higher highs for an uptrend and two lower lows for a down trend. You can also use different tools such as fibonacci to help you pin point these but everything depends on the live situation. Stop loss will be below the swing low point after descending trend line breakout or above the swing high point after ascending trend line breakout and for the take profit it will be divided into two parts, first one will be at the beginning of the trendline whether it’s going up or down and the second one will be at 161% inverse Fibonacci level.
Automate This Process
And if you do not want to go through all this manual labour. Pin pointing and drawing the trendlines to trading and managing the take profit safely. You can try out this free Trendline Breakout indicator that will automate this whole process.
Trendline Breakout Indicator
Trendline breakout indicator is specifically designed to help traders filter out this manual labour process of identifying, drawing and waiting for the breakouts and breakdowns. It also carefully assesses if the breakout / breakdown is true or false, after identifying the true signal the indicator carefully calculates the potential target point and then shows them graphically on the chart.
Features of Trendline Breakout Indicator
Following are some key features of the indicator.
Trendline Drawing
This indicator automatically identifies based on the specific wick data and swing points and then plots trend lines on the chart identifying the dominant trend in the market.
Breakout and Breakdown Signals
It also filters out the need to sit in front of the screen waiting for a breakout/breakdown. Once there is a true trendline breakout / breakdown, it will automatically trigger a trading signal on its own, helping traders pinpoint potential entry points.
False Breakout/ Breakdown Filter
There is also a filter incorporated in the indicator which reduces the false breakouts / breakdowns, helping traders avoid hasty entries.
Target Calculation
This indicator also helps calculate one of the most important aspects of trade management, Target Calculation. After the trading signal has been triggered, the indicator will then do precise calculations to identify the potential target levels and then display them visually on the chart.
Color-Change Labels
The indicator also features color changing labels that provide quick visual cues. Initially the labels are orange color, it changes to green color when the take profit level is hit and changes to red color when the stop loss level is hit.
Settings
Following image shows all the settings of the indicator
Conclusion
All the manual labour of identifying and drawing trend lines can be tiring and time consuming, this is where trendline breakout indicator come into play, automating all this manual labour with precision and
