Trendlines With Candlestick Patterns Can Give Accurate Entry And Exit Signals
Trendline is one of the most easiest to understand technical indicators. Most of the charting software will automatically draw the trendline for you. You can use a bullish trendline and the bullish candlestick patterns to pick long entry points as well as confirm trends. In the same manner, you can use a bearish trendline in conjunction with bearish candlestick patterns for a short entry in the market.
Combining trend lines with trend reversal and trend continuation candlestick patterns can give accurate trading signals about when to enter into a trade and when to exit an already open position.
For example there are bullish and bearish candlestick trending patterns like the bullish or bearish neck line pattern, bullish or bearish thrusting line pattern, bullish or bearish meeting line pattern etc that confirm the continuation of a trend. When you spot these candlestick patterns appearing above or below the trendline, you can safely continue with the long or short trade that you have initiated.
In the same manner when you find a bullish or bearish candlestick trend reversal pattern like the bullish or bearish three inside up pattern, bullish or bearish three outside up pattern etc appearing above or below a trendline, take it as a signal that the trend is about to reverse itself and this is the time to exit your trade.
You can also use trendlines and candlestick patterns to decide when to exit your position plus decide on the position of the stop loss. When you find price action to break a long established trendline, exit your position.
The problem with trend lines is that they change often. Everyday, you will have to draw a new trendline. One method of placing a stop loss is to use a support trendline or a resistance trendline and place the stop loss just below or above it.
A second method is to exit a trade when the closing price is below the bullish trendline or above the bearish trendline. This can keep you from having to replace the stops daily and also keep you in a trade if the price takes a slight dive during the day before it retraces. This provides a certain flexibility so that you don't have to see the trend continuing in the same direction after stopping you out of the market.
However, combining trend lines with candlestick patterns can be a powerful combination.
Article Source: FxTradingStock.com
About the Author
Mr. Ahmad Hassam has done Masters from Harvard University. Get these Forex Scalping Cheatsheets plus the 10X Scalping System FREE. Download this award winning Forex Trading System that made 1,306.50% in one month FREE and watch the banned system video.
by: Ahmad Hassam
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Word Count: 411
Date: Sat, 25 Dec 2010
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