Trend Lines How To Predict Breakout |
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| By Bobby Terdon | ||||
| Trend Lines are the most powerful technical analysis tools.
They have existed in the markets for centuries and have
proven themselves as a reliable trading tool. In this
article you will learn how to predict a breakout of a trend
line, in order to enter faster and earlier. Despite being a reliable and consistent technical tool, trading trend lines is not so easy. A trader needs to identify the trend lines properly and to decide on a trading strategy. The most popular trading strategies are the bounce, and the breakout. While the bounce is a contrarian strategy, the breakout is a simpler one - that signals a trading signal when a trend line is broken - and a trade is entered in the direction of the breakout. Still, entering a trade at the breakout itself can be risky as price can retrace back. Trader that trades breakout needs a early alert of a breakout - and signals for the upcoming breakout will be now explained. Breakout Sign #1: Strong Momentum The first sign of a breakout is strong momentum. When price is advancing towards the trend line in bigger and faster candles, it may be a sign of a future breakout. Breakout Sign #2: Rising Volume A rising volume can be a strong sign of a breakout - rising volume indicates that the forces of the market are gaining strength and that the momentum is getting stronger. Volume preceeds price in its trends, therefore a rising volume can predict a rise in price - that will lead to the breakout of the trend line. A combination of a rising volume with rising momentum is a strong sign of a breakout and in such market environment it is recommended not to trade counter-trendline (bounce). Breakout Sign #3: Lower Highs or Higher Lows This is the last and final predicting sign of a trend line breakout. If the trend line is ascending, lower highs indicate that sellers are gaining strength and pushing prices lower - to a breakout downwards. The same is true with descending trend lines and higher lows. This is a very powerful sign that is also useful for support and resistance levels. |
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| Article Source: http://prenet.co.za | ||||
| About The Author TrendLineX(TM) is a powerful indicator that trades trendlines automatically. It automatically calculates stop loss and signals exact buy and sell trades based on trend lines. |
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| © 2010 prenet.co.za |
