Have a good understanding of the following trendline factors if you want to use the trendline for technical analysis effectively.
- Trendline analysis can be very subjective - don't get caught in the trap of an over-analysis trap
- Support lines create support and resistance in the market.
- Use 3 anchor points to make sure you draw a quality Trendline.
- Use the common point method to "cross" false breakouts when drawing a Trendline.
- Price Action traders can enter orders on reversing candlestick patterns at the area of the trend lines that were previously determined.
- Look closely at the candle that closes outside your Trendline. Maybe that is the real breakout, the trading opportunity!
- Two Trend Lines run in parallel to create Price Channel structures.
- The wide-angle then gradually narrowed trend line intersects each other at 1 point, creating a bullish pattern - a potentially explosive breakout.
- The two growing trend lines create an elusive, high volatility pattern called the Cai Loa model.
- A price fragment that moves against the current price trend may produce a Flags Pattern.
- Stay tuned to see if the candle breaks out of the Flag pattern, which could be a signal that the current price trend is continuing.
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