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Trend lines

To find a trend line on a chart, you need to look for two points – two swing highs for a downtrend and two swing lows for an uptrend.

Drawing a trend line in a downtrend

For a trend line in a downtrend you are looking for a higher high followed by a lower high. You draw a line from the first high to the second high and extend the line out on the chart . You will look for a long trade when the price returns to the trend line for a third time. Unlike the traditional method of trading with trend lines, instead of entering into a short trade at this point, you will wait until the price breaks through the trend line and tests it again from the other side as support.

Drawing a trend line in an uptrend

For a trend line in an uptrend you are looking for a lower low followed by a higher low. As with the trend line in an uptrend, you draw a line from the first low to the second low and extend the line out on the chart. You will then look for a short trade when the price has broken through the trend line and tested is again from the other side as resistance.

In either case, you are looking to see if the testing of the trend line from the other side happens in confluence with the price retracing into the zone in order to look for a set up.