1. Look for trendlines with at least 3 touch points

To draw a trendline, only 2 touch points are needed, but to confirm the strength of the trendline so that we can trade, there should be at least 3 touch points. The more points a trendline has, the more valuable it becomes.

You guys look at the chart below, showing that the downtrend line has been confirmed when there are 3 touch points:

2. Measure time between touch points

Before a trendline breakout occurs, prices tend to concentrate and fluctuate around the trendline. And it is worth noting that the time for the price to touch the trendline will become shorter. As shown below:

As we can see in the picture above, the EURUSD pair in the D1 frame, the time between each touch on the rising trendline is getting shorter and shorter. The time between the last 2 touches was only 7 days, after which the trendline was broken and started a strong downtrend.

3. False breakouts on the trendline are good trading signals

False breakouts are very common when trading with trendlines. Inexperienced traders often find it difficult to tell whether a breakout is real or fake.

The figure below shows real and fake trendine breakouts:

In fact, false breakouts are great trade setups for traders if they are accompanied by divergences on RSI or Stochastic.

When trading false breakouts, you have to wait for the price to actually reverse back inside the trendline and then trade. Candlesticks formed on false breakouts often have long tails.

4. It is recommended to use confirmation from another tool

To confirm the setup before trading, each trendline is not enough. Traders should use other indicators to confirm such as candlestick patterns, Fibonacci or other technical indicators.

As the example below is a combination of trendline and Fibonacci. The price retraces to the downtrend line and also the 61.8 level on the Fibonacci as a confirmation signal for the trade setup at the trendline.

In addition, reversal candlestick patterns are also very useful such as pinbar, engulfing, marubozu, ... which are formed right at the trendline. Or you can also use overbought, oversold, or divergence signals to confirm a trade setup.

5. Trendline works better on large time frames

Trendline will work effectively when on larger time frames like from H4 frame and above. Because in a large time frame, the number of people following and trading according to the trendline will be larger, thus increasing the importance of the trendline.

At low time frames, there will be many noise signals, so trading with trendline is more likely to fail.

6. Wait for the pullback to confirm the trendline break

Trendlines work similarly to support and resistance levels. And when a trend line is broken, do not rush to chase the price to trade. Instead wait for a pullback to retest the previously broken trendline, as a confirmation of the breakout before you enter a trade in the direction of the breakout.