Trade Gold Trading

Trend-Line Break - Trading Trend Line Reversal Signals

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

Since the trendline is the point of support/resistance then we expect the market to move towards the in the opposite market trend market trend market trend market trend market trend trend direction after a trendline break. This is because the support or resistance area that the market price has been moving along has now been broken. When this happens traders will close their open orders which they had bought or sold. This is called taking profit.

Uptrend Reversal - Upwards Trend Line Break

When price breaks an upwards line (support level) the market will then begin to move down or start to consolidate at this technical level before moving down.

Trend Line Break on XAUUSD Trading Chart - XAUUSD Trading Trend Line Reversal Signals on XAUUSD Gold Charts

Upward Trendline Break

This reversal signal is considered to be complete with the formation of a lower high or a lower low - double top chart pattern. This also provides an opportunity for the online traders that want to sell Gold metal to go short once the trendline is broken.

Downtrend Reversal - Downward Trendline Break

When price breaks downwards line (resistance area) the market will then move up or start to consolidate at this technical level before heading up.

Trend Line Break on Gold Trading Chart - Gold Trading Trend Line Reversal Signals on XAUUSD Gold Trading Charts

Downward Trendline Break

This reversal signal is considered to be complete with the formation of a higher low or higher high - double bottom chart pattern. This also provides an opportunity for traders who want to buy to go long once the trendline is broken.

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

To trade this trend line reversal setup as a trader once you open a new trade in the direction of trend reversal the price should immediately move in that market direction, in a price breakout manner. This means that the market should immediately move in that direction without much of a resistance.

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

Another tip is to wait for the trendline to be broken & for the market to close above or below it to confirm this signal.

What happens is that most traders place trades waiting for reversal even before the trend is broken, only for the price to touch this line & for the prevailing market direction to hold and the Gold metal prices to continue heading in current trend direction.

Hence, when trading this trend line break reversal setup it's best to wait til the breakout has been confirmed by price closing above or below the trend line, based on the direction of market.

  • Upward Market Direction Reversal - this signal is confirmed once the market closes below this upward trendline, this should be the correct time to open a short sell trade, so as to avoid a fake out.
  • Downwards Market Direction Reversal - this signal is confirmed once the market closes above the downward trend line, this should be the correct time to open a buy long trade, so as to avoid a fake out.

Combining with Double Tops or Double Bottoms Patterns

A good trade setup to combine this trendline reversal setup with is the double tops and double bottom chart patterns.

This double tops and double bottoms chart reversal pattern should already have formed before the market trend break signal. Because these double top and double bottom are also trend reversal setups, then combining these 2 setups will give XAUUSD traders a good probability of avoiding whipsaw fakeouts.

In the above chart examples these double tops and double bottoms setup set-ups can be confirmed to have formed even before the reversal setup appeared.

First Example of Upwards Direction Reversal - the Double tops pattern had already formed before the market trend break reversal setup appeared on the Gold price chart.

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

Gold Trading Trend Line Reversal Signals Combined with Double Tops and Double Bottoms Gold Chart Patterns

Double Top or Double Bottom Combined with other Trend Reversal Signals

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