Best Trend Lines Trading Strategy (Advanced)

hey guys so in this video we will show you our key trendline trading strategy that no one talks about make sure to click the subscribe button and hit the notifications bell so that you know exactly when we release new content so from looking at the comments a topic that has been requested many times is how to draw and use trend lines effectively also right now comment below and tell us what topics you want us to cover as we always look at the comments to decide what to create next so first what are trend lines a trend line is a line we draw on our charts that connects the swing highs and swing lows during a trending market so here we have a clear downtrend we have a run a pullback a run a pullback and a run at the bottom of each run before the pullback begins this is what we call a swing low at the top of each pullback before a run begins this is what we call a swing high so what this means is in an ideal downtrend price will be making lower highs and lower lows now a trendline is then applied to connect the swing highs along the top and swing lows along the bottom so let's move on to an uptrend here we have a clear uptrend we have a run a pullback a run a pullback and a run at the top of each run before the pullback begins this is what we call a swing high at the bottom of each pullback before a run begins this is what we call a swing low so what this means is in an ideal uptrend price will be making higher highs and higher lows now our trendline is then applied to connect the swing highs along the top and swing lows along the bottom now this is an important point price won't always move this smoothly in trending markets but we are showing you this as a reference to what an ideal trending price movement looks like so why exactly do we draw trend lines the first reason is because trend lines can act as a form of support or resistance along the top the trendline acted as resistance when price touched it and along the bottom the trendline acted as support when price touched it now you don't enter trades blindly just because price has touched a trendline you always wait for price action in combination with other factors which we will get into later in this video now the second reason we draw trend lines is because a break of a trendline can signal a possible trend change so in a downtrend we have our trendline placed above the trend when price breaks this trendline it can signal a possible trend change to an uptrend now vice-versa in this moving uptrend we have our trendline placed below the trend and when price breaks this trendline it can signal a possible trend change to a downtrend so again you have your moving uptrend we have our trendline placed along the bottom of the uptrend once the price breaks this trendline it signals a possible trend change to a downtrend and again once this downtrend starts we put a trendline above the moving downtrend and once price breaks this trendline it signals to us another possible trend change to an uptrend again here were your trend lines before you had your breaks and then trend changes now this is a very important point what we just showed you is what occurs in an ideal situation but is not the law you need to pair these trend line breaks or rejections with key price action factors before looking for a trade entry which we will get into later in this video so now that you know what trend lines are and why we apply them on to our charts let's go through in depth how to draw trend lines effectively so first let's go through the concepts we follow when drawing trend lines one you need a minimum of two touches to be able to draw a trend line the more touches the better but more touches does not guarantee that it will hold the next time around two trends don't always move smoothly they're often choppy and imperfect three treat trend lines as areas meaning use them as guidance for your overall analysis not the law four don't force trend lines if they are obvious and help your overall analysis draw them in but if not leave them out because there won't always be suitable price movement where you can draw a trend line on it so now let's start simple with what ideal best-case scenario trend lines will look like now here is your current moving downtrend you click on your line drawing tool start from past the first swing high and drag the line down connecting the two points also make sure when you draw your trendline to have it extended further down because if price makes it back up to this trendline in the future you want to have it ready there as a reminder to look so here was their last trendline that would have been drawn before price broke the trendline now if you want you can also draw this longer-term trend line along these higher points like this so next here's removing down again we connect the swing highs along the top and the swing lows along the bottom so next now this is an important point to discuss there isn't always a trendline you can draw as there isn't always going to be suitable price movement for a trendline to be applied to it so to the left here we had good price movement where you would have had two trend lines applied before price broke the bottom trendline and started a downtrend but now looking at the current trend there isn't suitable price movement to apply a trendline you could apply a super-tight trendline like this but that does not help your overall analysis so in this case we leave it out so let's get into imperfect trend lines so a type of imperfect trendline you will often see is when not all the points are touching what this means is when you draw a trendline you won't always be able to connect all the swing highs or swing lows so in that case just draw your trendline where it can touch the most amount of points and leave the other points out so here is a clear moving downtrend and let's go ahead and apply our trend lines where we can get as many touches as possible now notice how these points here all touch the trendline but where these points here do not touch and that is perfectly fine because again we use trend lines as guidance we don't use them on their own for trade entries so let's go to another example so here we have our clear moving downtrend we place our trend line along the top connecting the swing highs and we place our trend line along the bottom connecting the swing lows now again notice the points that we were able to connect with the trend line and the points that didn't quite reach the trend line which again is fine now this leads us to a question we often get asked which is do you draw your trend line through the candle closes candle bodies or wick ends and at this point you should already know the answer which is to draw your line in an area where you can get the most amount of touches meaning the line you draw will hit both wicks and candle bodies depending on the trend you are looking at so here was your clear downtrend and in order to hit all these points here this is where you would have placed your trendline now notice how this point here the trend line is at the wick end and again at this point here the trend line is at the wick end now at this Third Point the trend line is piercing the wick and touching the candle body which is necessary in order to be able to hit the following points so again the trend line hits the candle body and here the trend line hits the wick end and here the trend line hits the wick and body notice how the trend line hits candle closes and wicks whichever allows for us to get the most amount of touches price and finally broke out and started a trend change so same along the bottom our trend line would be placed like this because that way we can hit all three points so let's do this one more time you're clear moving down trend and along the top we would place our trendline like this again wick ends doesn't touch candle close wick end and along the bottom we would place our trendline like this so don't think too hard about this because again we use trend lines as guidance and treat them as areas not a solid line now that you know what trend lines are and how to draw them let's jump into how to use trend lines in combination with price action and before we continue if you want us to make more videos more often make sure to hit the thumbs up button and to comment below right now with your questions and thoughts as this lets us know you want more videos so we use trend lines in combination with price action in two key ways the first is for trend trading and the second is for reversal trading let's start with the first which is trend trading with trend lines now here is exactly what you want to look for when trend trading with trend lines which is an area where support or resistance crosses with a trend line this access point is also what we call an area of high confluence now an area of high confluence is an area where a lot of traders have their eye on meaning that there is a higher probability that traders will be taking action out these areas which is when trade opportunities arise so let's take this one step further this area is of high confluence because different schools and types of traders are all watching it first you would have support and resistance traders eyeing this area for possible short trade entries second you would have trendline traders eyeing this area for possible short trade entries third you would have price action and candlestick traders eyeing this area for possible short trade entries and fourth you would have confluence traders like us who are eyeing areas like this where we know other schools of traders are watching for possible short trade entries all these different types and schools of traders with different trading styles all eyeing this area for possible short opportunities is what can trigger a possible trade entry short now let's break this down step by step of what should be going through your mind as a trader also to point something out we are only using one time frame in this example which is the daily time frame and the reason this is important is because later in this video we will begin showing you how to use multi time frames so first you would have established that this is a moving downtrend as price was making lower highs and lower lows so you would want to trade with the moving downtrend second you would have identified your trend line through these three points and drawn it in and had it stretched out further in case price came back up to it third you would have looked left and spotted the support turned resistance level here and had it drawn in fourth you would have then identified this area of high confluence where your trend line and resistance level intersected which means there would be possible short trade opportunities once price got here fifth when price started to approach this area since you had this area already identified you were watching to see what price would do once it got here okay a price action so you were probably thinking why not just enter a trade short right away once price got to this access point again as a reminder from past videos it does not matter how good an area is you do not enter trades blindly once price gets to these areas you always wait for price action because price can easily blow right through so you then had a reaction to the level through these two red candlesticks not breaking through and bouncing downwards now at this point there is still no trade short because a reaction to an area does not equal a reversal it could just bounce or stall at a key area and then still break right through do not forget that this is a moving uptrend now here is the trick in order to enter after a rejection of a key area of confluence you put a trendline under the immediate moving trend and wait for a break of the trendline to occur in order to confirm that the moving uptrend is over and that the bigger downtrend can continue this is a very important concept to understand because even though your bigger trend is a downtrend your immediate trend is an uptrend and the moving up trend can continue and break right through and trigger a larger trend change this is why it was so important for the short-term trend to be over through the trendline break so that the bigger trend can continue now the most important point here is at the break of the short-term trend line occurred after the rejection and bounced from an area of high confluence or else you would have just had a short-term trend line break in nothing else now this is a lot to take in so let's recap this one more time to drive the point home first your big-picture trend was a downtrend so you had a big picture bearish bias the problem is your short-term trend was an uptrend meaning price is currently moving with bullish momentum and can easily break right through your long term trend line this is why we needed to wait and see if we could get bearish price action to occur inside of this short term uptrend so that the short term trend would be bearish to match the long-term bearish trend your bearish price action then came in two parts the first was a reaction to the access point and area of high confluence but more importantly the confirmation of this was through the break of the short-term trend line and at this point the short-term trend was bearish to match the big picture bearish downtrend you could then take a trade on the break of the trend line a trade through the intraday timeframes through a momentum play or using any of the other strategies as you now have your directional bias confirmed as short or down now here is where you take your trading to the next level if we had good candlestick patterns occurring right at this access point here you would have placed a very short term trend line up tight like this and waited for a break of this tight trend line on the lower timeframes and taken even earlier entry which we'll get into right now so let's that so in this example we are going to show you the same concept but take it a step further and apply the usage of multi time frames now this is the daily time frame we first identified that this was a moving downtrend through the lower highs and lower lows and again we want to trade with the dominant downtrend you had your imperfect trend line established through these points here so you had it drawn in and extended further down to the left you had your support turned a resistance point here so you had your level drawn in and extended further out again this point here is where resistance and the trend line intersected and would be your access point an area of high confluence now as price came off to this access point we had no idea whether price would break through or reverse because again this short-term moving trend is an uptrend your big picture trend is bearish and a downtrend but your short-term trend is bullish in an uptrend which means you have a conflict in your directional bias so in order to solve that you need to wait for bearish price action to present itself inside of the short-term trend and to confirm that the short-term trend is over or else there is no trade now the first thing we do when price gets to this access point is wait for some form of price action to present itself again you don't know if there will be price action forming at all in this case here the price action formation we got was a hanging candlestick which shows the price is indeed reacting to the level but again a reaction does not mean a reversal will occur so here is where you take your skill set up a notch since we had a candlestick reaction and formation at this access point we then put a tight trendline in like this the problem with tight trend lines is that they can often lead to fake outs so how do we get around this problem we use a lower timeframe specifically the four hour time frame so that we can see deeper into this immediate trend so let's put the four hour time frame beside our daily time frame so you can see both simultaneously so here we have both time frames side by side this chart on the left is your daily time frame meaning each candlestick represents one day the chart on the right is the four hour time frame meaning each candlestick represents four hours time here is the resistance level on the daily time frame and here is the same resistance level on the four hour time frame here is the long-term trend line on the daily timeframe and here is the same long-term trend line on the four hour time frame here is the short-term trend line on the daily timeframe and here is the same short-term trend line on the four hour time frame on the daily timeframe short-term uptrend you couldn't see much but now in contrast on the four-hour time frame you can see so much more detail you can actually see the swing highs and swing lows of price now that you understand multi timeframes let's recap this all you had a big-picture downtrend meaning a long-term bearish bias but a short term uptrend meaning a short term bullish bias which means you were conflicted in your direction once price gets to your access point an area of high confluence you need price action for a trade short since you had a reaction to the access point through the hanging candle you put a tight trendline in but because on the daily timeframe you cannot see deeper into the short term uptrend you needed to use the four-hour time frame to look deeper into the short term uptrend here in the four hour time frame we were then looking for a trend change on this moving uptrend so that the short term uptrend could turn bearish to match the long term bearish downtrend you have a run a pullback a run a pullback a run a pullback a run a pullback a run this is your clear uptrend because price is making higher highs and higher lows so here it is price then broke the short term trend line which is your bearish signal number one and then makes a lower low your bearish signal number two you now have bearish price action that entered the market confirming that the short term uptrend is over and that the longer-term downtrend can continue now again there are many ways to enter the market you can enter right on the break through a momentum play using the lower timeframes but the most important part is that your directional bias is confirmed now as down and short so the key here is that this all occurred after the rejection and bounced from an area of high confluence or else you would have just had a trend line break and that would be meaningless now why is it important to use the four-hour time frame to look for a trend change after the rejection of your access point well because without the trend change or trend line break price could have easily done this instead and kept making higher highs and higher lows and kept respecting the immediate short-term uptrend and broke right through the long term trend line so let's take this concept a step further now in this example we'll show you another trick you can use if you are a longer-term trader which is instead of using the daily time frame and for our time frame using the weekly in combination with the daily for swing trade entries so this is the weekly time frame and this is the daily time frame remember that in a previous video we stated that things you find on the weekly time frame hold more weight so let's go to the process again here in the weekly you have the clear moving down trim as prices making lower highs and lower lows so you want to trade with the moving big picture downtrend you then have your trend line established through these two points here you had multiple rejections and your support turned resisting zone here here is your access point an area of high confluence where the trend line and resistance crossed once price got here you had two weekly candles that failed to break through including a bearish red candle that rejected the weekly resistance level again bounces and reactions don't equal trades so we put a short-term trend line below the immediate trend now in order to look for short trade entries you need to confirm that the short term uptrend is over so we need to go to the daily timeframe to look for a trend change in bearish price action inside of this current moving uptrend before looking for a trade entry short now here in the daily timeframe this is your same trend line from the weekly the same resistance level from the weekly the same access point from the weekly and the same uptrend and trend line from the weekly so here is they're moving up trend where you have a run a pullback a run before you had your break of the trendline and a lower low and you can start looking for trade entries short through a breakout or intraday entry again the key here is that this all occurred after the rejection in bounce from an area of high confluence or else you would have just had a trend line break and that would be meaningless now we're going to take it even one step further now this is where we introduce true top-down analysis we will be using three timeframes starting from the weekly to the daily been to the four hour timeframe so starting with the weekly we were in a clear moving downtrend here was the weekly support turned resistance here was your trendline here was your access point now after you identified all your levels on the weekly we jump to the daily here in the daily you had a perfect long with candle rejection of your access point meaning a rejection of both the weekly trendline and weekly resistance but again still no trade unless we have confirmation that the short term uptrend is over so we go to the four-hour time frame to find a trend change on the short-term moving up trend here in the four hour timeframe you have your weekly and daily resistance weekly and daily trendline and weekly and daily access point you then have your short-term trend line here and once price hits the access point and then breaks the short term trend line your short term trend turns bearish and matches the long term bearish downtrend and this is when you start looking for trade entries short as all timeframes are bearish and confluent so now that you understand how to use trend lines for trend trading let's move on to the second way to use trend lines which is through reversal trading now before we continue these videos take a lot of time for our team to create so if you are enjoying the video so far and want us to continue to make more videos make sure to hit the thumbs up button and to comment below right now with your questions and thoughts and we'll work our best to answer all your questions and to create videos around your requests so in this section we are going to go through a reversal trading strategy with trend lines now what you do is you look for key price action patterns that have formed right before a trend line break now there are many kinds of price action patterns you can look for such as wedges triangles combining price action patterns with candlesticks and so forth as there are a lot but for now focus on these two the double top or double bottom price action pattern and the trend change price action pattern so let's start with the first which is the double top or double bottom right before a trend line break you first identify your trend line through these points here now this is a clear moving uptrend and the reason you want to identify a reversal price action pattern right before a trend line break is because you are going against the dominant uptrend what this means is just a trend line break can often be a fake out so we like to pair a reversal pattern as an early signal of a possible big picture trend change but then to pair it with the trend line break as confirmation so the price action pattern we got was this double top which is a reversal pattern now what does the double top tell us in terms of the uptrend well it show that price failed to make a higher high which means this is a loss of momentum now if you have seen our previous videos evidently many traders would have taken a trait right at this long wick candle rejection of resistance and then waited for an intraday trend change but for more secure traders what you can do is wait for the trend line break to confirm that the uptrend is over this is also a good example of why you should never chase trades as you had trade opportunities right at the double top but also had opportunities to enter through a breakout strategy after the trend line break now if this were a downtrend you would look for a double bottom so let's jump to the next pattern we look for right before a trend line break which is a trend change price action pattern so in order to spot a trend change you look for these traits specifically in an uptrend you look for a lower high or a lower low to occur right before a trend line break and in a downtrend you look for a higher low or a higher high to occur right before a trend line break so here is your moving uptrend and we place our trend line below the uptrend connecting these points here you have your run pullback run pullback run pullback run pullback now at this point during the trend you have a clear uptrend as price is making higher highs and higher lows it is not until you have your lower high form here which is when you would think to yourself that a lower high in an uptrend shows a loss of momentum once price then breaks the trend line this confirms the trend change and shows bearish momentum entering the market again the reason you want to look for reversal price action patterns before a trend line break is because it shows momentum loss which is important when you go against a strong trend so let's take this one step further and add in multi time frame analysis to this concept so here on the weekly time frame what you would have first identified is that this was a moving downtrend you then identified your trend line through these two points here you would have then identified this double bottom through these two points here so what you do is you want to jump down a time for it to the daily so that you can see more detail into the price action that is occurring within this double bottom and look for a trend change price movement so here on the daily you have your same trend line from the weekly and your same area of support from the weekly here is where the double bottom occurred on the weekly time frame and again we see a lot more detail on this daily time frame so again in order to confirm the weekly double bottom reversal pattern you want to also look for bullish price action that shows a trend change from a downtrend to an uptrend on this time frame and you got this through the following things you have your clear moving downtrend through the run pullback run pullback run price and failed to make a lower low and made a same low showing a loss of momentum so you have a double bottom inside of a double bottom and then a higher high which is the first sign of a possible trend change you then had another higher low which is another trend change signal after you had your trend line break you would then look for breakout entries through the intraday and lower timeframes so this topic of using multi timeframes and time frame confluence gets even deeper and would take too long to completely explain in one video but we will continue to build on it in future videos now this is a very important point we want you to understand which is that trading comes down to the simple concept of trade quality meaning there are low-quality trades and high quality traits the more you learn things the more you can see which then allows you to choose between okay trades and high-quality trades think back to the past videos where we showed you the importance of Candlestick patterns at key levels and of course you can enter just like that but those are average all of the trades what you want to do is take high quality trades and knowing the concepts we have introduced in this video will help you build towards that endgame increasing trade quality is knowing when not take trades which is just as important as knowing when to take trades so if you want to learn more about our trade entry strategies head on over to our website at wise trade comm so if you enjoyed this video and want us to make more videos more frequently make sure to hit the thumbs up button and also comment below with your thoughts and what kind of topics you want us to cover I'll just let us know you want more videos so thanks for watching and I'll see you in the next episode [Music]

Channel: Wysetrade

Views: 2,788,727

Rating: 4.9682875 out of 5

Keywords: trend lines, trend line, trendline, trendlines, trading strategy, trading strategies, price action, swing trading, day trading, forex, stocks, wysetrade, price action trading

Id: YuPhWMIGcU4

Length: 28min 55sec (1735 seconds)

Published: Thu Oct 10 2019