Trade Forex Trading

Learn Forex Trading Online Free Tutorials

Trend Line Break

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

Since the line is the point of support or resistance then we expect the forex market to move towards the opposite direction. When this happens forex traders will close the open trade orders which they had bought or sold. This is called taking profit.

Forex Uptrend Reversal - Forex Upward Trend Reversal

When forex price breaks upward line (support) the market will then move down

Forex Trend Break and Trend Reversal - How to Trade Forex Trend Line Break Reversals

This forex trend reversal signal is considered to be complete with the formation of a lower high or a lower low. This also provides a trading opportunity to go short once the upward forex trend line is broken and there is a confirmation pattern which is the formation of a lower high or a lower low.

Forex Downtrend Reversal - Forex Downward Trend Reversal

When price breaks downward line (resistance) the market will then move up

Downtrend Forex Reversal - Forex Downward Trend Reversal - Trend Reversal Indicator for Intraday Trend Line Break Reversal Strategy

Downwards Channel break

This signal is considered to be complete with the formation of a higher low or higher high. This trend line break setup also provides a trading opportunity to go long once the downward trend line is broken and there is a confirmation pattern of a higher low or higher high.

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

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

Broker

If on the other hand the forex market does not immediately move in the direction of the forex price breakout then it is best to close out the trade because it means that the current trend is still holding and it might still have some momentum or if the current trend does not continue there might be a price consolidation which might take up some time.

Another tip is to wait for the trend line to be broken and for the market to close above or below the trend line so as to confirm this trend line break reversal signal.

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

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

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

  • Downward Market Direction Reversal - this downward trend reversal signal is confirmed once the market closes above the downward trend line, this should be the correct time to open a forex buy long trade, so as to avoid a whipsaw.

Combining Trend Reversal Forex Trading Signals with Double Tops or Double Bottoms Chart Patterns

A good trade setup to combine this forex trend line reversal setup with is the double tops chart patterns and double bottoms chart patterns. Read Double Tops Forex Chart Patterns and Double Bottoms Forex Chart Patterns Tutorial.

These double tops or double bottoms forex chart patterns setup should already have formed before the trend line break reversal signal. Because these double tops and double bottoms forex charts patterns are also reversal forex signals, then combining these two forex trading setups will give the trader a good probability of avoiding a forex whipsaw signal.

In the above forex chart screenshots these double tops and double bottoms chart pattern setups can be confirmed to have formed even before the reversal trend line break signal appeared.

First Example of Upward Direction Trend Line Break Reversal Signal - the Double tops forex chart pattern had already formed before the trend break reversal signal appeared on the forex chart.

Second Example of Downward Direction Trend Line Break Reversal Signal - the Double bottoms forex chart pattern had already formed before the forex trend line break signal appeared on the forex chart.

Double Tops Double Bottoms Combined with Forex Trend Line Breaks Reversal Signals - How Do I Trade Forex Trend Line Break Reversals?

Double Tops or Double Bottoms Combined with other Reversal Signals


Forex Seminar Gala


Forex Seminar


XM Copy Trading


Broker

 

Technical Analysis