Trading from the trend level
Firstly, we need to be able to identify the current upward or downward trend. Secondly, there must be horizontal support or resistance levels on the chart that have previously been tested by the price.
The last condition necessary to enter the trade is the so-called trigger.
The trigger will be based on the price behavior that we can read through the candlestick patterns. A good trigger can be a pin bar, a large body candle, or other candlesticks pattern.
It is about getting the right momentum to open a trade.
Is there anything interesting in it? You can see even with the naked eye that there was an uptrend in the five-minute interval. Accessing drawing tools on the Olymp Trade platform You can draw all kinds of lines on the chart using the Trend Line.
You can use it to mark trends as well as to draw horizontal support and resistance levels. The RSI 14 is also shown in the above chart, but we will talk about it later on. Both Trend Line and RSI can be selected from the menu available by clicking on the trading from the trend level icon in the upper left corner of the platform next to the instrument name.
Finding convenient places to open a position There are two things you need to be able to identify on a chart.
These are trend lines and horizontal support and resistance levels. The upward trend line should provide support for the rising bottoms. For a downward trend, the line should be a barrier to descending tops. In both cases, we have to lay the line on at least 2 turning points otherwise it is impossible to draw a line. Horizontal support and resistance lines are based on the turning points of the price chart. The following scheme shows the existence of a trend. The black line is an upward trend line that is broken.
The market very often replicates this pattern.
You can say that these are repetitive cycles, of course, the structure on the chart may look a bit different, but the main idea is always the same. The market moves in an upward trend, creating higher tops and higher bottoms. When the price breaks down the trend line, it is the first symptom of a shift in the direction. Another sign that the trend is reversing is breaking the support given by the previous bottom. Be aware, however, that sometimes this indicator for binary options signal only be a deeper retracement or consolidation pattern before the trading from the trend level trend continues.
RSI — why do you need this oscillator? The Relative Strength Index is an oscillator with a value range from 0 to It is assumed that a market above 70 is bought out and a market below 30 is sold out. Its application helps to identify a trend reversal. RSI is also useful for filtering false signals.
1. The Highs and Lows Tell the (Whole) Story
I encourage everyone to treat the chart as a testing ground. Practice in using technical analysis tools always gives you a broader view of the market.
Therefore, do not be afraid to draw. Draw horizontal levels of support and resistance and then observe whether the price will react with these levels. Some price levels are reactive once, others are more significant support 2, 6, 8 or resistance 1, 3, 5, 7. The breakthroughs of these levels and their sequence indicate the strength of the trend. Do not feel overwhelmed by their number. My objective was to show you how important it is to practice drawing on the chart.
The Stages of a Forex Trend
I have added some trend lines. Trends have this in common that their dynamics are not constant. Look at trend line number 1. You can see immediately that on the intraday scale it is difficult to expect that the growth will continue at that pace. The trend line was broken, but the previous support level before the breakout survived the test. Trend line number 2 was defended three times. In the end, it was broken. Note, however, that a significant level of support was not broken.
Lines 3 and 4 are dynamic reaction lines. I drew them to show you that they both come together in the shape of a triangle.
Identifying A Trend
We know from the theory of technical analysis that a triangle can be a pattern of trend reversal or continuation. It all depends on the direction of the breakout. Here we have a knockout and therefore it is quite an important signal that we may soon be dealing with a reversal of a dominant upward trend.
How to apply TLS knowledge in practice? Look at the chart below: The price touched the trend line three times.