day after day I always see Traders have confusion on how trend lines are actually meant to be drawn what validates a trend line how to trade breakouts and much more so in this video I'm going to walk through everything you need to know about trading trend lines including a lot of secret tips that most Traders aren't talking [Music] about okay so firstly what is a trend line well the simplest way to put it is that a trend line is an area of support support or resistance during an uptrend or a downtrend markets in uptrends move
up and then have a pullback then they move up again and have another pullback and repeat this process over and over again what this creates is highs and lows which we can use to draw trend lines now a lot of people draw these completely wrong and even sometimes people draw way too many creating absolutely horrible charts that look like this the correct way to draw a trend line is is to find three significant points that line up and connect you don't want to consider insignificant highs and lows you just want to focus on the most
obvious tops and bottoms in the market and to make this as easy as possible to understand I'm going to first show you the ideal trend line so the ideal trend line is in a market that has a lot of volume three clean touches with good space between each and we also wanted to have a near 45° angle or less you can use the candle wicks and sometimes the candle closes within a trend line it's preferable to have it as just the wick but if you have to use the candle closes at some points within a
trend line that can still be acceptable so once you find a trend line with something like these characteristics well congratulations you have an ideal trend line now we need to know how to trade this trend line if the price actually comes and revisits this trend line again then you need to look at what happens before making a decision is price going to use it as support or resistance and bounce off of it or is price going to break the trend line and the best way to tell if price is going to bounce off of a
trend line is to watch the price action as it approaches if price is smoothly approaching a trend line while still in an overall uptrend we can expect price to bounce and if price was in an uptrend making higher Highs but is now making a clear lower high while approaching the trend line more aggressively we could expect the trend line to break so how do we trade a trend line breakout well instead of rushing into a trade the moment price breaks out of the trend line we want to wait for a retest as a more optimal
place to enter we do this because not all trend line breakouts actually work this is just the nature of technical analysis there's no such thing as absolutes for instance here you can see price broke down out of the trend line and then it just came back right through causing everyone trading the breakout to lose their trade so instead of entering directly on the breakout you ideally want to wait for the price to come back and retest the trend line forming a new swing low or high to be confident that the trend has actually changed so
now this next tip for drawing trend lines is extremely valuable and what a lot of pro Traders do to avoid fake outs and make everything a lot simpler instead of drawing Regular lines we can use the rotated rectangle tool to make it into a zone so for this trade we could have noticed the trend line Zone above right here since it already has three touches then instead of entering here we could wait for a retest and some bullish price action to be more confident in entering a long position and then you can see that the
real breakout occurs trend lines can develop in many different ways even on the higher highs in uptrends and lower lows in downtrends and by drawing them out like this you'll eventually notice chart patterns starting to form but that's a topic for another video so drop a comment below if you want me to cover everything about trading chart patterns make sure to subscribe and turn on the notification Bell so you know when we post and we'll see you in the next video
