What is an Example of a Trend Line Analysis?

Trend Indicators

How to Use Trend Lines to Set Entry, Exit & Setting Stop Loss Orders:

Trendline technique can be used to determine good entry and exit points for trades, protective stops are placed just below them.

The trend line bounce technical analysis strategy is a low-risk entry technique used by traders to place entry trades after price has retraced.

Trades are setup along these trend line bounce levels and a stop losses placed just above the downward trendline for a downwards trend or below the upward trend line in an upwards trend.

The trendline break is a crucial trend reversal indicator of possible reversal signal. When the trendline is broken the price starts move in the opposite direction. This provides an early exit signal for traders to exit their open trades and take profits.

When there a penetration of these trendline levels, it's a signal that the price can start moving in the opposite direction.

Unlike other analysis indicators there's no formula used to calculate a trend line, this pattern is just plotted between 2 chart points on a chart.

Technical Analysis Methods of Trendlines

The trendline bounce is a continuation signal where price bounces off this line to continue moving in same direction as that of the trend. In a downward trend, the market will bounce downwards after hitting this trendline bounce level which is the resistance area. In an upward trend, the market will bounce up-wards after hitting this trendline bounce level which is the support area.

The trendline break is a reversal signal where the market goes through the trendline & starts moving in the opposite direction. When a up trend is broken then the sentiment of the market reverses and becomes bearish & when a down trend is broken then the sentiment reverses and becomes bullish.

For very strong trends, after this trendline break signal, the price will consolidate for some time before moving in the opposite direction. For short term trends then this trend line break signal will mean price might reverse direction immediately.

In trading, both the trend line bounce & the trend line break that are used in analysis of charts are based upon these trend line levels being support & resistance areas.