Trade Gold Trading

XAUUSD Trend Line Break

After price has moved in a specific direction for an extended period of time within a channel it reaches a point where it stops moving within the channel. When this happens we say that the trendline has been broken.

Since this line is point of support or resistance then we expect the market to move and head towards the in the opposite market trend price trend direction. When this happens traders will close the trade orders that they had bought or sold. This is known as taking and booking profit.

Up trend Reversal

When gold price breaks-out up line (support) the market will then move down

Trendline Break on xauusd Charts - How Do I Identify Trendline Break Reversal Signal Example?

This signal is considered to be confirmed with formation of lower high or lower low. This also provides an opportunity to go short once it's broken.

Down trend Reversal

When gold price breaks downward line (resistance) the market will then move up

Trend Line Break on Charts - How to Identify Trendline Break Reversal Signal Example

Downward Channel break

This signal is considered to be complete with formation of higher low or higher high. This also provides a trading opportunity to go long once it's broken.

NB: Sometimes when the price breaks its trend it may first consolidate before moving in the opposite direction. Either way it's always good to takeprofit when the market direction reverses.

To trade this trading setup as a trader once you open a new trade in the direction of the trend reversal the price should immediately head in that particular direction, in a price break-out manner. This means the market should immediately head in that direction without much of a resistance.

If on the other hand the market does not immediately head in direction of the price breakout then it's best to close out the trade because it means that the trend is still holding.

Another tip is to wait for the trend line to be broken and for the market to close above or below it to confirm this trade signal.

What happens is that most traders place trades waiting for a reversal even before the trend is broken, only for the price to touch this line and for ruling market direction to hold and gold to continue with the current market direction.

Hence, when trading this trading setup it is better to wait until the breakout has been confirmed by xauusd gold price closing above/below the trendline, based on the market direction of the price.

  • Upwards Market Direction Reversal - this signal is confirmed once the market closes below this upwards line, this should be the right time to open a short sell trade, so as to avoid a trade fake out.

  • Downward Market Direction Reversal - this signal is confirmed once the market closes above the downwards line, this should be the correct time to open a buy long trade position, so as to avoid a trade fake out.

Combining with Double Tops or Double Bottoms Patterns

A good trade set up to combine this set-up with is the double tops & double bottoms patterns. Read Double Top & Double Bottom Chart patterns Guide.

This setup should already have formed before the market trend break signal. Because these double tops and double bottoms are also reversal trading signals, then combining these 2 setups will give the trader a good probability of avoiding a whipsaw.

In the above chart screenshots these setups can be confirmed to have formed even before the reversal xauusd signal popped up.

First Example of Upward Direction Reversal - the Double tops pattern had already formed before the trend break reversal setup appeared on the trading chart.

Second Examples of Downwards Direction Reversal - the Double bottoms trading chart pattern had already formed before the trend break reversal setup appeared on the chart.

How Do I Trade Trend Line Break Reversal Signal? - Trend Line Break on Charts

Double Top or Double Bottom Combined with other Reversal Trading Signals

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