The trendline is one of the important technical tools in the analysis used by many traders. Especially the price action traders. However, there are also many traders who combine trendline with other technical indicators to trade, because trendline alone is not enough for traders to trade because there will be a lot of noise signals.

How to draw the trendline

A trend line is a line that connects the top or bottom of a market to indicate a trend. A trendline requires a minimum of 2 touchpoints. For an uptrend, we connect 2 lows together, for a downtrend we connect 2 highs together.

Another important note that you need to remember is that when drawing a trendline, you should not cut across price action. Have a look at the chart below to get a better idea of ​​how to draw.

Example of the correct trendline:

An example of a wrong trendline:

After understanding how to draw the trendline, we move on to the rules of the trading. The indicators we will use further for this strategy are the RSI and the MA line.

Trading principles for buy orders
  • The price breaks the trendline and closes above it by a bullish candlestick.
  • The price is above the moving average
  • The Signal Bar (upper right corner of the price chart) indicates that the signal is mostly (all for best) green. This indicator tells you whether the signal to buy or sell, but is displayed in green, and sell will be displayed in red.
  • RSI also broke the trend lines above.
  • Buy at a candle that closes above the downtrend line.

The take profit point is half the distance from the top to the bottom of the downtrend line. As shown below:

In this chart, the high is 1.13732 and the bottom is 1.12145, so half of the distance from bottom to top would be 79 pips. So the take profit target of the strategy is 79 pips

Trading principles for sell orders
  • The price broke the trendline and closed below it by a bearish candlestick.
  • The price is below the moving average
  • The Signal Bar indicator (upper right corner of the price chart) shows that the signal is mostly (all for best) in red.
  • The RSI also breaks down the trend lines below.
  • Sell at candles whose prices close below the uptrend line.

The take profit point is half the distance from the bottom to the top of the uptrend line. As shown below:

As of this chart, the high is 1.12151, the bottom is 1.09164. So half of this distance is 149 pips. The take profit target will be 149 pips.

The stop loss is placed at the nearby high for the sell signal and at the nearby bottom in the buy signal. As the first 2 pictures show.

Please refer to the strategy. The indicator file at the end of the article. However, there is a small note for you that the Signal Bar indicator will need a password. Password is free_at_tsd. Please fill in the input of the indicator. As shown below: