{"id":93673,"date":"2016-08-06T11:34:37","date_gmt":"2016-08-06T15:34:37","guid":{"rendered":"http:\/\/countingpips.com\/?p=93673"},"modified":"2016-08-02T11:35:03","modified_gmt":"2016-08-02T15:35:03","slug":"how-drawing-trend-lines-helps-traders-of-all-experience-levels-part-2","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/08\/how-drawing-trend-lines-helps-traders-of-all-experience-levels-part-2\/","title":{"rendered":"How drawing trend lines helps traders of all experience levels, part 2"},"content":{"rendered":"
August 6, 2016<\/div>
\r\n<\/div><\/div>

By Admiral Markets<\/b><\/p>\n

<\/p>\n

Dear Traders,<\/p>\n

After reading
\npart 1<\/u><\/a> of my series on trend lines, you probably agree that drawing trend lines is an important component of a well-balanced trading style.<\/p>\n

Furthermore, I also revealed why this technique is suitable for traders of
\nall <\/em>experience levels\u2026<\/p>\n

…even though it does come with one condition.<\/p>\n

Reading and implementing the lessons of the second part is an essential learning step.<\/p>

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\r\n

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<\/div>\n

Continue reading if you want to know more about:<\/p>\n

…drawing correct trend channels\u2026<\/p>\n

…assessing which trend lines are valuable\u2026<\/p>\n

…and knowing which part of the chart is relevant.<\/p>\n

\"free<\/a><\/p>\n

The value of steep trend lines<\/h2>\n

Trend lines with a steep angle typically occur when price is moving with momentum.<\/p>\n

In short, when the majority of
\ncandles<\/u><\/a> are moving in one direction, with small counter-trend pullbacks.<\/p>\n

Steep trend lines are useful as a trail stop loss (exit)…<\/p>\n

…or as a setup to enter the break of a counter-momentum setup (entry).<\/p>\n

\"trend<\/p>\n

The meaning behind the trend line angles<\/h2>\n

You might be wondering – what actually qualifies as a steep or shallow trend line?<\/p>\n

Steep trend lines typically have an angle of 45 degrees or more\u2026<\/p>\n

…whereas shallow trend lines vary from 0 degrees to roughly 25 degrees.<\/p>\n

Anything between 25 and 45 degrees can be considered medium-angled – which is excellent for trend channels (we’ll get back to that later).<\/p>\n

It’s crucial to note that I only make a rough estimate of the trend line angle – not the exact measurements.<\/p>\n

You should well remember one rule I’m going to tell you right now – and it’d be best if you put it on a sticky note somewhere close to you.<\/p>\n

What does this rule state?<\/p>\n

It’s simple trading that always prevails.<\/p>\n

\"trend<\/p>\n

How many bars should be visible on the chart?<\/h2>\n

Did you know that traders can change the angle of a trend line?<\/p>\n

That’s one of the fascinating features of the chart.<\/p>\n

Traders can manipulate the angle by increasing and decreasing the number of bars or candles which are visible on the chart.<\/p>\n

The chart with the best balance displays approximately 150 to 200 candles.<\/p>\n

Nuts and bolts of trend channels<\/h2>\n

Until now, we’ve discussed single trend lines representing support or resistance.<\/p>\n

Trend channels consist of two trend lines which are parallel to each other.<\/p>\n

Trend channels signify
\ntrend formation<\/u><\/a> – that’s why they should have an angle of 25 to 45 degrees.<\/p>\n

Such an angle provides an ideal balance of momentum and correction.<\/p>\n

Channels with lower or higher angles can still provide useful information as support and resistance\u2026<\/p>\n

…but they do not qualify as
\ntrend<\/em> channels.<\/p>\n

We can simply call them channels instead.<\/p>\n

\"trend<\/p>\n

Keeping your distance between the hits<\/h2>\n

In
\npart 1<\/u><\/a>, I mentioned that two hits qualify as a potential trend line\u2026<\/p>\n

…but the third point is required before a trend line is confirmed.<\/p>\n

There are additional guidelines for counting the correct number of hits on a trend line.<\/p>\n

These guidelines state that you should not count multiple candles that are touching the trend line at the same spot.<\/p>\n

Instead, these hits should only count as one point on the trend line.<\/p>\n

There has to be a gap of several candles between the hits before you can count them as two separate hits.<\/p>\n

These guidelines are very important – otherwise, traders could see multiple trend lines instead of just one.<\/p>\n

\"trend<\/p>\n

Multiple trend lines and cutting through candles and wicks<\/h2>\n

Another critical guideline is how traders draw trend lines in relation to the candles and wicks of the candles.<\/p>\n

The best trend lines use candle highs and lows and do not cut through any part of the candle.<\/p>\n

However, the charts are sometimes not that perfect.<\/p>\n

A trend line can still look fine even if the trend line cuts through a wick or part of the candle.<\/p>\n

After all, trend lines and trend channels are mere indication of price actions.<\/p>\n

They show extremes that go past a trend line – so drawing a trend line which cuts through a candle or wick is acceptable.<\/p>\n

There is a boundary, though.<\/p>\n

I avoid drawing trend lines where entire candles are placed on the opposite side.<\/p>\n

This is what they call a
\nbreak<\/em> or breakout.<\/em><\/p>\n

Last but not least, I think it’s perfectly fine to draw multiple trend lines on the chart.<\/p>\n

The market itself is not perfect – and drawing multiple trend lines only adds value to the analysis.<\/p>\n

It doesn’t hurt to see different angles, support\/resistance and connect different tops, bottoms, wick or candles.<\/p>\n

Your trading will probably benefit from it.<\/p>\n

However, make sure that the number of trend lines is not too confusing.<\/p>\n

\"trend<\/p>\n

Trading trend line breaks, breakouts and bounces<\/h2>\n

Now that you’ve read part 2 of our series on trend line, you know everything you
\nneed<\/em> to know about trend lines:<\/p>\n

    \n
  1. what trend lines are the best<\/li>\n
  2. what characteristics they share; and<\/li>\n
  3. what items they must have.<\/li>\n<\/ol>\n

    You can draw valuable trend lines all by yourself, too.<\/p>\n

    Now, it’s time for the next step – using these trend lines for profitable trading decisions.<\/p>\n

    If you want to know how to apply trend lines to trading, watch the video below.<\/p>\n

    We go into detail on decision spots, breaks, breakouts and bounces – all the essentials.<\/p>\n