Trend trading is the most profitable option on any asset. It is necessary to identify the start and, more importantly, the end of the trend – where all classical trading strategies advise to close the trade. But the end of a trend is also a signal that the price may swing and we can use that to enter the market another time using the Horizon X Trend Line break rules.
Before swinging, the price usually consolidates in a quite wide range. It is important to wait for a solid signal. You can learn more about it from the free basic training course – click the link below to get it.
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Building the trend line requires two straight new local lows (for an uptrend) or highs (for a downtrend). In other words, we mark a support, and the point where the price breaks it will be the first signal of a coming swing.
When the price breaks the trend line, we wait for a pull back of the A-B movement, the length of which should not exceed 75% of the previous movement. After that we can mark the trend line, which the price should test before we enter the trade. At least two same-trend candles must form before and after the final point C of the pattern!
Point B must be broken by at least one pip. The trend line is built using B-C movement High and the closing point of the nearest candle body.
Entering the trade
We enter the trade when the price tests the trend line. We should place the Stop Loss 2-3 pips lower (for a long trade) or higher (for a short trade) of the pattern starting point on 4-digit.
To avoid losses if the trend continues, we should apply the rule of Safe: open two positions of equal lot size and the same Stop Loss. The first Take Profit should be equal to the Stop, and after the price reaches it, we move the trade to the no-loss. The second Take Profit should be equal to 3x Stop Loss and cover the major part of the pullback. You can also get the first 10 pips of profit or use the trailing stop!
Here are some tips for using the trend line:
- you can get high profit only from strong market movements; therefore, you should pick instruments and timeframes with mid or high volatility. Such are the European and American Forex sessions, and their crossing zone. The market activity drops during the Asian session and you can find proper trend lines only when important news is released.
- notice the angle of the trend line built using highs/lows – the larger it is, the stronger the swing will be; the farther the pivot points are from each other; the sooner the trend will end. The current price extremes can be broken in a wider range as well, so don’t look for a pattern if there is none!
- as we said before, the trend line on which we enter the market, is built using the extreme of the pullback and closure of the nearest candle body. But there are exceptions to every rule. If the nearest body is too small, a doji candle for example, you can expand the entry zone by 3-5 pips.
- A trend line should form ‘naturally’, not due to some market manipulations or fundamental events; otherwise the price may only reach the Safe and swing towards the Stop Loss after the initial momentum.
We teach how to avoid the traps set by the market big shots and trade only reliable signals at our free basic Horizon X training course. You can obtain it by clicking the link below.
Get the free basic Horizon X traiding course here
Wish you profitable trading and see you soon!