CFD Trendline Break

After cfd price has moved in a specific direction for an extended period of time within a channel it reaches a point where it stops moving within the channel. When this happens we say that the trend line has been broken.

Since the line is point of support or resistance then we expect the cfd market to move toward the opposite direction. When this happens traders will close the cfd orders which they had bought or sold. This is referred to as taking profit.

Up cfds trend Reversal

When cfd price breaks-out upwards line (support) the cfd market will then move down

This signal is considered to be confirmed with formation of lower high or a lower low. This also provides a trading opportunity to go short once it is broken.

Down cfds trend Reversal

When cfd price breaks-out downwards line (resistance) the cfd market will then move up

Downwards Channel break

This signal is considered to be complete with formation of higher low or higher high. This also provides a trading opportunity to go long once it is broken.

NB: Sometimes when price breaks its cfd trend it might first of all consolidate before moving in the opposite direction. Either way it is always good to take profit when the cfd market direction reverses.

To trade this cfd setup as a trader once you open a new trade in the direction of the market trend reversal the cfd price should immediately move in that direction, in a cfd price break-out manner. This means that the cfd market should immediately move in that direction without much of a resistance.

If on the other hand the cfd market does not immediately move in the direction of the cfd price breakout then it is best to close out the trade because it means that the cfd trend is still holding.

Another tip is to wait for the trend line to be broken & for the cfd market to close above or below it so as to confirm this cfd trading signal.

What happens is that most traders open trades waiting for a reversal even before the cfd trend is broken, only for the cfd price to touch this line and for the current market direction to hold and the cfd instrument to continue with the current market direction.

Therefore, when trading this cfd setup it is best to wait until the breakout has been confirmed by cfd price closing above or below the trendline, depending on the direction of the market.

• Upwards Market Direction Reversal - this cfd signal is confirmed once the cfd market closes below this upward line, this should be the correct time to open a sell short trade, so as to avoid a cfd whipsaw.

• Downwards Market Direction Reversal - this cfd signal is confirmed once the cfd market closes above the downwards line, this should be the correct time to open a buy long trade, so as to avoid a cfd whipsaw.

Combining With Double Tops or Double Bottoms Chart Patterns

A good trade set up to combine this cfd setup with is the double tops and double bottoms patterns. Read Double Top & Double Bottom Chart patterns Guide.

This setup should already have formed before the cfd trend break signal. Because these double tops and double bottoms are also reversal cfd signals, then combining these two setups will give the trader a good probability of avoiding a cfd whipsaw.

In the above chart screenshots these cfd setups can be confirmed to have formed even before the reversal cfd signal appeared.

First Examples of Upward Direction Reversal - the Double tops pattern had already formed before cfd trend break trading signal appeared on the cfd chart.

Second Example of Downward Direction Reversal - the Double bottoms cfd chart pattern had already formed before cfd trend break trading signal appeared on the cfd chart.

Double Top or Double Bottom Combined With other Reversal CFD Signals