This method allows you to capture the tops and bottoms of the price swings with accuracy and on the dot. It has the best risk and reward ratios.
The trendline strategy works when the price moves up or down and forms high swing highs and high swing lows for uptrend and lower swing highs and lower swing lows for a downtrend. Connect 2 higher swing lows for upward trendline. This will provide support. For downward trendline, you can connect 2 lower swing highs and this will provide resistance.
If you notice and observe this in your chart, there are 2 tendencies that the price may act. It’s either it breaks or bounce the trendline.
- Draw an upward trendline connecting a minimum of 2 higher lows or higher swing lows.
- The price must go down and touch and bounces the upward trendline.
- Place a buy stop order 2-5 pips above the high of the candlestick that touches the trendline.
- Place your stop loss 2-5 pips below the low of that candlestick.
- Take profit on previous significant lower swing highs.
- Draw a downward trendline connecting a minimum of 2 lower highs or lower swing highs.
- The price must go up and touch and bounce the downward or falling trendline.
- Place a sell stop order 2-5 pips above the low of the candlestick that touches the trendline
- Place your stop loss 2-5 pips above the high of that candlestick
- Take profit on previous significant higher swing lows.
Lock profit by moving stop loss and trail it behind swing highs or lows because there is less chance of you getting stopped out frequently as you are placing it behind support and resistance levels essentially.