Principles of How Do I Draw Stocks Trend Lines?
To draw stocks trend line stock traders should use stocks candlesticks charts
- The points that are used to plot the trend lines are points that are along the lows of the stocks price bars in an upward moving stocks market. An upward stocks trend move is defined by higher highs and higher lows on the stocks price chart.
- The points that are used to plot the trend lines are along the highs of the stocks price bars in a downward moving stocks market. A downward trend move is defined by lower highs and lower lows on the stocks price chart.
- The points that are used to draw stocks trend lines are extremes points - the high or the low stocks price. These stocks price extremes are important because a stocks price close beyond these extreme stocks price points is interpreted as a stocks signal that the trend direction might be changing. This is analyzed as entry stocks signal or an exit stocks trade signal.
- The more often a stocks trend line is tested (touched) by the stocks price but it is not broken, then the more powerful the stocks signal of this trend line.
There are two main stock trading technical analysis techniques of trading this stocks trend line setup:
- The Stocks Trend Line Bounce
- The Stocks Trend-Line Break
Technical Analysis Methods of Stocks Trend Lines
Stocks Trend-Line Bounce - How Do You Interpret Stocks Trend Line Bounce?
The stocks trend line bounce is interpreted as a stocks trend continuation signal. Stocks trend line bounce is when the price bounces off the trend line to continue moving in the same direction of the trend line.
- In an upward stocks trend - the stocks price will bounce upwards after hitting this upwards trend line level which is the area of stocks price support region.
- In a downward stocks trend - the stocks price will bounce downwards after hitting this downward trend line level which is the area of stocks price resistance region.
Stocks Trendline Break - How Do You Interpret Stocks Trend Line Break?
The stocks trendline break - the trendline break is a reversal signal where the price goes through the trend line & starts moving in the opposite direction to that of the stocks trend.
When a stocks upward trend line is broken - the stock trading market sentiment reverses and becomes bearish
When a stocks downwards trend is broken - the stock market sentiment reverses and becomes bullish.
For very strong stocks trends, after a stocks trend line break signal, the stocks price will consolidate for some time before moving in the opposite direction. For short term stocks trends then this trend-line break reversal signal will mean stocks price may reverse immediately after this stocks trend-line break signal.
Stocks trend line bounce and stocks trend-line break are used in stock trading technical analysis based on technical analysis theory that these trend line levels represent support and resistance levels for the stocks price movement.
Entry, Exit & Setting stops:
Stocks trend line trading method is used to determine entry and exit points for stocks trades, protective stop loss orders are placed just above or below these trend lines after stock trades are opened using stocks trend line technical analysis methods.
The stocks trend line bounce signal is a low risk entry stocks method used by traders to place entry stock trades after stocks price has retraced and is now bounced of a stocks trend line & is now moving in direction of the trend. Stocks trades are opened along these trend line levels and a stop loss orders placed just above or below these trend lines.
The stocks trend-line break signal is an indicator of possible stocks trend reversal. When a stocks trend line is broken the stocks price will start moving in the opposite direction. This stocks trend-line break signal generates an early exit stocks signal for stock traders to exit their open stock trades and take profit for these stock trades. When there a penetration of these trend line levels - stocks trend-line break - this is a stocks signal that the stocks price can start moving in the opposite direction to that of the current stocks trend.
Unlike other stocks technical analysis indicators there is no formula used to calculate stocks trend lines, this stocks trend line formation is drawn between two chart points on the stocks price chart.
Principles of How Do I Draw Stocks Trend Lines?
