Trendlines are one of the most simplest and the easiest technical indicators. As a trader, you should learn how to draw trendlines accurately. PRO traders always respect these trend lines. so do the Markets. When you combine, these trend lines with candlestick patterns, you can get highly profitable trading signals. Both supplement and confirm each other!
There are many candlestick trend reversal patterns that give warning ahead of time about the impending trend reversal or turning of the market. In the same manner, there are many trend continuation pattern that when appear indicate that the trend is likely to continue for sometimes in the future. When you combine these candlestick patterns with trendlines, you got a good confirmation that the trend is going to continue or reverse itself.
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.
Trendlines are very important in making entry and exit decision. If you use them correctly, you can make profitable trades.
Now, you might be thinking how to use a trendline to define your exit stop level as it keeps on moving frequently. You will find the trendline changing daily on the chart. A good risk management strategy is to determine the support trendline in an uptrend or a resistance trendline in a downtrend and place an appropriate stop that is good for the day.
A second strategy that you can use is to instead of putting a stop loss and updating it daily, you can leave it open and at the end of the day, if you find the closing price above or below the trendline, exit your position. But the danger with this strategy is that at the end of the day, you might find the closing price too far below or above the trendline.
However, the price can dive and close much lower or higher than the trendline at the end of the day making your exit much lower or higher than if you had used a stop loss. It is up to you to decide which method fits your trading strategy and style best. Master these highly profitable Candlestick Patterns with this FREE 82 page PDF Candlestick Guide. Download this Forex Mystery Candlestick Patterns Recognizer Indicator.