Revealing my SECRET Trendline Break Strategy
Summary
TLDRThis video script introduces a unique trendline trading strategy that involves drawing trendlines, waiting for a price breakout, and then entering trades after a retest and rejection of the breakout area. It emphasizes patience and proper risk management with stop losses and take profit points, aiming to change the way traders approach trendlines.
Takeaways
- 📈 Start by drawing a trend line in an uptrend by connecting the higher lows, and in a downtrend by connecting the lower highs.
- 🔗 A valid trend line should be touched by the price at least three times, with more touches indicating greater strength.
- 🚫 Avoid entering a trade immediately when the price breaks the trend line, as this can lead to false breakouts and losses.
- 📊 Use a rectangle tool to highlight the candle that breaks the trend line, and wait for the price to retrace back to this area before considering a trade.
- 🔄 Look for confirmation of rejection in the form of multiple long wicks or a doji candlestick before entering a trade, indicating the price does not want to continue in the breakout direction.
- 🚀 Enter a trade when the price shows clear rejection of the rectangle area, placing the stop loss above the breakout candle for a sell position, or below it for a buy position.
- 💰 Set take profit levels based on the previous touches of the trend line, using these as potential resistance or support levels.
- 🔄 Adjust take profit levels dynamically as the price reaches each level, moving the stop loss to protect profits and allowing the trade to run for further profits.
- 📉 Be prepared to exit the trade if the price approaches the next resistance or support level and shows signs of reversal, rather than holding onto the trade indefinitely.
- 🌐 This strategy can be applied across various time frames, from the 15-minute to the daily chart, though the speaker prefers using shorter time frames like the one-hour or four-hour chart for better clarity.
Q & A
What is the basic concept of trading trend lines according to the script?
-The basic concept is to connect higher lows in an uptrend and lower highs in a downtrend to form a trend line. The trend line should be touched by the price at least three times for it to be considered valid and stronger with more touches.
Why is it important to wait for the price to break the trend line before trading?
-Waiting for the price to break the trend line is part of the 'magical trend line break strategy' mentioned in the script. It helps to avoid premature entry which can lead to fake-outs and potential losses.
What is the purpose of highlighting the candle that breaks the trend line with a rectangle tool?
-Highlighting the candle that breaks the trend line helps to focus on the specific price area that needs to be retested. It serves as a visual aid for identifying the entry point for the trade after the price has retraced.
Why should a trader not enter a trade immediately after the price breaks the trend line?
-Entering immediately after the price breaks the trend line can result in a fake-out where the price might revert, causing a loss. It's recommended to wait for the price to retrace and show rejection of the broken trend line area before entering the trade.
What is the significance of looking for a confirmation of rejection after the price retraces to the broken trend line area?
-Confirmation of rejection indicates that the price does not want to continue in the direction of the breakout, providing a more reliable signal to enter a trade with a higher probability of success.
How does the script suggest determining take profit levels for the trend line break strategy?
-The take profit levels are determined by drawing a line at all the times where the price touched the trend line before the breakout. These points are labeled as points A, B, and C, with point C being the first take profit level, followed by points B and A if the price continues in the same direction.
What is the recommended approach for managing the take profit levels after the first level is reached?
-After the first take profit level (point C) is reached, a trader can either close the entire trade to secure profits or take partial profits by closing half of the trade and letting the other half run to the next take profit level (point B).
Why is it important to move the stop loss as the price creates new structure?
-Moving the stop loss with the new structure of higher highs and higher lows ensures that a trader is protected from losses while still allowing the trade to run for potentially greater profits.
What is the recommended time frame for trading the trend line break strategy according to the script?
-While the script uses the daily time frame for demonstration, it is recommended to trade the strategy on time frames such as 15 minutes, one hour, or four hours, depending on the trader's preference.
How does the script address the reality that no trading strategy works all the time?
-The script acknowledges that not all trades will be successful and emphasizes the importance of adapting and reacting to the market. It suggests being prepared to exit a trade if the price behaves contrary to expectations, even if it means moving the stop loss to secure some profit.
Outlines
📈 Mastering the Trendline Break Strategy
This paragraph introduces a unique trading strategy focused on trendlines. It emphasizes the importance of drawing a valid trendline by connecting multiple highs in an uptrend or lows in a downtrend. The strategy involves waiting for the price to break the trendline and then observing its behavior. Traders are cautioned against entering the trade immediately after the break, as this can lead to false breakouts. Instead, they should wait for the price to return to the breakout candle and look for confirmation of rejection before entering the trade. The speaker also explains how to set stop losses and take profits based on the trendline touches, suggesting a methodical approach to maximize profits while minimizing risks.
📉 Applying the Trendline Break Strategy in Downtrends
The second paragraph delves into applying the trendline break strategy in a downtrend. It reiterates the importance of drawing a valid trendline by connecting lower highs and waiting for the price to break out. The speaker advises against entering the trade immediately after the breakout, instead recommending waiting for the price to return to the breakout area and looking for rejection signals. The strategy involves placing a stop loss below the breakout candle and setting take profit levels based on the previous touches of the trendline. The speaker also discusses the flexibility of trading on different time frames and the importance of adapting to market conditions, acknowledging that no strategy is foolproof.
🔄 Adapting to Market Reactions in Trendline Trading
This paragraph highlights the importance of adapting to market reactions when trading with trendlines. The speaker demonstrates how to react to the market by adjusting stop losses and taking profits based on the price action. They emphasize the need to move the stop loss to the last higher low as the market creates new structures, ensuring that traders remain in profit even if the trade is stopped out. The speaker also shares an example of a failed trade, showing how to manage risk and maintain profitability despite the strategy not working as expected. The paragraph concludes with a reminder to always be prepared to adapt and react to the market's behavior.
🚀 Enhancing Trading Skills with Advanced Price Action Strategies
The final paragraph wraps up the discussion on trendline strategies and invites viewers to explore more advanced price action strategies. The speaker shares a personal example of trading in an uptrend, demonstrating how to identify a valid trendline, wait for a price retest, and enter a trade based on rejection signals. They explain the process of setting stop losses and take profits at key levels, emphasizing the importance of managing risk and maximizing profit potential. The speaker encourages viewers to learn more about high win rate strategies and join a community of traders, suggesting that continuous learning and adaptation are crucial for success in trading.
Mindmap
Keywords
💡Trend Lines
💡Uptrend
💡Downtrend
💡Trend Line Break
💡Rectangle Tool
💡Rejection
💡Stop Loss
💡Take Profit
💡Partial Profits
💡Price Action
💡Risk-Free Trade
Highlights
Introduction of a unique trendline break strategy that promises to change trading habits.
Explanation of how to draw a valid trendline by connecting higher lows in an uptrend or lower highs in a downtrend.
Emphasis on the importance of a trendline being touched by the price at least three times for validation.
Advice against entering a trade immediately when the price breaks the trendline to avoid fake outs.
Introduction of a rectangle tool to highlight the candle that breaks the trendline for later reference.
Strategy to wait for the price to retrace back to the breakout candle before considering an entry.
Importance of looking for confirmation of price rejection of the breakout area before entering a trade.
Method of placing a stop loss above the breakout candle to manage risk in the trade.
Description of a dynamic take profit strategy based on previous trendline touches.
Concept of taking partial profits at the first take profit level and letting the rest of the trade run.
Demonstration of how to adjust take profit levels as the price progresses through predetermined points.
Acknowledgment that there is no 100% certainty in trading and the importance of taking profits at appropriate levels.
Example of a downtrend scenario and how the strategy applies to it.
Use of a box tool to highlight the breakout candle in a downtrend for later analysis.
Discussion on waiting for a retest of the breakout area and looking for rejection before entering a trade.
Strategy for moving the stop loss as the price creates new higher lows in an uptrend.
Realistic portrayal of a trade that gets stopped out but still results in a profit due to proper risk management.
Personal trading example using price action and the trendline strategy in an unfiltered manner.
Final emphasis on the adaptability and reaction to the market as key components of successful trading.
Transcripts
trend lines they are easy to trade right
everybody knows how to trade trend lines
oh just buy when price bounces off the
trend line hehe but i can guarantee you
that you have never seen this trendline
break strategy that i'm about to show
you if you can master this strategy it
will change the way that you trade
forever mind-blowing
the first step is to draw a trend line
right obviously in an uptrend just like
this you want to connect all the higher
lows with your trend line too in the
downtrend you want to connect all the
lower highs with your trend line make
sure you try to get as many touches as
you can because for a trend line to be
valid the price has to touch it at least
three times it is not enough to draw a
trend line if price has only touched it
two times remember the more times the
price touches the trend line the
stronger it is it's just like your
support and resistance so the second
step is to wait for your trend line
break remember this is the magical trend
line break strategy so of course we're
going to be waiting for the price to
break out of this trend line so right
here we still wait to see what price
does price is starting to break through
the trend line but we still wait and see
and at this point of time this is when
price has finally broke up off the trend
line right here but you do not want to
enter yet most beginner traders they
will enter for ourselves right here
immediately when price breaks through
the trend line and end up the price went
back up and it's a fake out and they
lose a lot of money so please do not
commit this mistake do not enter yet be
patient instead of entering for the
trade right here i want you to take out
your rectangle tool and highlight this
candle right here the candle that broke
out of the trend line which is this one
right here and what i want you to do is
to just like draw a box and just like
drag it to the right side like this just
drag it so the third step is to enter
and exit like a pro so you want to wait
for price to come back to the candle
that broke out of the trend line so at
this point of time let's see what
happens next you can see price has
finally came back up to this candle
where it just broke down the trend line
yes retrace all the way up here at this
point of time remember you still want to
be patient you do not want to enter
immediately when price come back to this
area here you want to look for some sort
of confirmation that tell you that price
is rejecting this rectangle area then
that is when you enter for the trade so
let's look at the next candle next
candle you can see like price is just
rejecting this entire rectangular era
you can see price gave us three long
week candles not three actually four
long weekenders which show us that price
does not want to go up right this is a
very valid re-test right we tested the
trend line very valid so we can enter
right here for our sell position once we
see our confirmation that price is just
rejecting this rectangular area so i
will place my stop loss above the candle
that broke out of the trend line which
is this candle right here and i'll just
place it above this box like this for
your take profit this is where the magic
happens this is a very important concept
that you must understand because this is
the secret to my entire trend line
strategy i want you to zoom out and draw
a line at all the times where price
touches the trend line right here
and right here
and right here and also right here and
right here as you can see these are all
the times where price touches the trend
line and then bounces up from the trend
line so this will be our take profit
levels let me explain actually this is
like too much lines so in this case
let's just delete these two right here
and let's stick with these three lines
so i'm gonna name these three lines this
is point a this is point b and this is
point c your first take profit should be
at point c and then if price break
through point c then your second take
profit can be at point b
here's how this strategy works in this
case what you can do is that you can
either take all of your profits at point
c right here just when price reaches
point c you just close the entire trade
and you take all your profits but if you
want to leave the trade to run so that
you can get more profits what you can do
is to take partial profits which means
when price reaches point c you close
half of the trade you close 50 of the
trade so you let the other 50 of the
trade the other half run to your point b
and then when price reaches point b then
that is when you can close the entire
trade right now this is where the magic
happens price is gonna reach point z and
then it's gonna reach point b next and
then finally it's gonna go down to point
a yeah so in this case i'll just take my
first profit at point c first so let's
look at what happens next price go down
go down go down we just wait wait wait
and smash our take profit you can see at
this point of time we have smashed our
first stick profits right so at this
point of time we have closed half of the
trade now we have the other half to run
right we have the other half to run to
our point b so you can just see like
price just broke out of point c and now
it might go to point b so i'll just
shift my take profit all the way down to
point b
right here and let's look at what
happens next you can see like price
retraced up there again we still did not
get stopped out
[Music]
bam we just smashed our point b we just
smashed our second take profit and at
this point of time we have closed the
entire trade by the way guys i'm just
showing you this example on the daily
time frame all right so this trade
literally take months to go into take
profit but please this is not how i
trade all right i'm gonna be using one
hour time frame for this strategy or
even a four hour time frame i'm not
gonna be trading on the daily time frame
i'm just using the daily time frame to
show you guys as an example because on
the daily time frame the charts is just
much more cleaner for me to show you
guys but please trade this strategy on
the time frames that you want to trade
on b the 15 minute the one hour or the
four hour this strategy works on every
single time frame so right now you can
see that price has just broken point b
but i want you to look at where price
goes next
point a just like how we predicted price
went down to point a right here so right
now price has just broken through point
a guess where is it gonna go next
right here at this point because at this
point price bounces off our original
trend line and then after price
breakthrough this point it's gonna come
down to this point just take a look at
this
just like what we predicted guys price
went all the way down to this level and
ultimately there is no 100 certainty
that price is gonna get down to this
level right here the first trendline
bounce because this is quite low
sometimes price can go to either one of
these points and then just reverse right
like there is no hundred percent
certainty that price is going to go down
all the way down to like the first
trendline bounce all right that is why i
tell you guys to take your first profit
at point c and then second take profit
at point b because once again there is
no guarantee that price is gonna get all
the way down to this first trendline
bounce now here's another example you
can see that right now we are in a
downtrend this time and we can draw a
trend line connecting all of these lower
highs and as you can see right here
price has bounced off this trend line
multiple times which makes it a very
valid trend line because remember at
least three touches and right now he has
more than three touches so we are good
so right now the next step is to
obviously wait for price to break out of
this trend line so it's still weird as
you can see like right here at this
point of time this is when price break
out of the trend line let me just zoom
in so this is the candlestick that broke
of the trend line so what i'm going to
do is to take out your box tool once
again take out your rectangle tool and i
want you to like literally highlight
this candlestick right here and then
just draw a box around here just strike
the entire box and just drag it to the
right like this so these two
candlesticks are the ones that broke out
this trend line remember guys you do not
want to enter immediately when price
break of the trend line that is like
newbie newbie
newbie way to trade all right that is
newbie way we are professionals now so
we want to wait for price to come back
down to this box then that is when we
enter for the trade so you can see price
went back up and then we can see right
now it's coming back down okay once it
came back down to this rectangle area we
are waiting for some sort of
confirmation that tell us that price is
rejecting this little box and it's gonna
head back up that is when we enter for
the trade at this part of time this is
where our enter for our buy position
because price gave us a long weak candle
multiple times once again you can see
there's a lot of candles that gave us
long wigs right here which pretty much
just show us that price is rejecting
this strong area and it's gonna go back
up right now so right here this is when
i would enter for a buy position place
or stop loss below this rectangle area
below like this candlestick that broke
off the trend line right here right and
by the way if you wanted to get a sniper
entry you can enter when this doji
candlestick form right here at this
point of time this is when the doji
candlestick form which show us that this
little retracement right here is losing
momentum and the buyers are gonna take
over so at this point of time you can
just enter right there and also at this
point of time this is when like price
has come back down to the candlestick
that broke out the trend line so you
know what we'll just enter right here
actually so this point right here this
is the last touch before price broke up
the trend line so this is your first
take profit and as you can see price
just like smash our take profit already
and then your second take profit could
be at the second area the second point
which is right here and i want you to
remember this very very important point
there is no guarantee that price is
going to get up all the way up to this
level or even up to this level right
here there is no guarantee right what we
want to do is to just like react to the
market so what i mean by that is that if
i see price like go up and then go to
like near this area around here and then
starts reversing and heading back down
guess what i'm gonna be getting out of
the trade all right i'm not gonna be
stupid enough to hold the trade all
right so yeah first take profit smash
let's see if we can smash this second
take profit
okay you can see like price go up come
back down to this area to retest it and
then go up so at this point of time you
can draw a second resistance area right
here you can see there's a second
resistance area right here and you can
see
uh price just consolidating at this area
here at this part of time what you can
do is that you can move your stop
stop-loss right you can move your
stop-loss right here so right here your
new stop-loss will be below this last
higher low because remember as price
creates structure as price like create
your higher highs and higher lows you
always want to make sure that you move
your stop-loss this is the last higher
low so now price is creating a new
higher low so i'll just move my stop
loss right here in case like price
reverse and head back down then guess
what we will still get stopped out in
some profits because remember we entered
for a buy position right here so even if
we get stopped out right here we are
still in profit so we wait okay you can
see like price just stopped us out like
this this is the reality of trading
right there is no strategy that is going
to work all the time sometimes the
strategy just does not work and right
here i just wanted to show you guys and
be honest with you that sometimes the
strategy might not work in this case you
always want to make sure that you adapt
and react to the market so in this case
we just got stopped out but guess what
we did not lose any money at all because
this was a risk-free trade because
remember our stop-loss was originally
right here and now we have moved our
stop-loss right here so now we gotta
stop out and guess what we are still in
profit because we entered all the way
down here so right now you can see even
though we got stopped out we are still
in profits don't worry if you still do
not get it i'm gonna show you another
example and this time i'm gonna show you
guys how i personally trade this
trendline strategy using price action
this is gonna be totally unfiltered so
once again this is the uptrend so you
want to draw your trend line connecting
all the higher lows and you can see this
is a valid trend line because there is
like more than three touches right so at
this part of time price has just broken
off the trend line right here so i'll
just take my box too once again and then
draw the candle that broke off the trend
line which is this candle right here
this candle right here broke off the
trend line so i'll just draw a box
around it right just drag it to the
right just like this so right now i do
not want to enter here i want to wait
for price to
come back up to retest this same box
this same area wait for some sort of
rejection head back down like this then
that is when i can finally enter for the
trade so let's do it right here guys you
can see right here price came back up
all the way up here to retest this
entire rectangle area and right here i'm
waiting for some sort of rejections that
show me that okay price is rejecting
this rectangle area and it's gonna
continue to head back down like this
little rate candlestick alone is not
enough for me to enter for the trade so
wait right here guys you can see right
here this is when i will enter for my
cell position because you can see like
twice just rejecting this rectangle area
like if price wanted to continue to go
up to this uptrend right continue this
uptrend it will just like continue going
up like this but no price did not do
that price gave us a rejection and this
area which show us that this is a very
valid re-test so i place my stop-loss
above this rectangle it will first take
profit at this point right here point c
and then point b
and then point
a right here so how i will do it is that
i'll place my first take profit right
here you can see this is the one is the
three almost three wrists to reward
which is
fatty tang all right that is very pain
all right so that is my first take
profit so if price reaches this area
here guess what i'm gonna move my take
profit all the way down here price went
back all the way down there and smash
our first take profit once it smashed
our first take profit i would have moved
my take profit to my second take profit
at this point of time it also smashed it
it's really really just as simple as
that guys your point a your point b and
poi c so right now price has smashed
this to take profit so what i can even
do is that i can re-enter for this trade
if price retraces back to d11 and then
go back down to this area then that is
when i can enter for our sell position
right here again but let's just see what
price does if i just go straight down
like this to this area then i will not
enter
okay you can see right here guys price
actually like break through point b come
back up to re-test point b before
heading back down actually what you
could have done is that you could have
like waited for a price to break through
point b like right here right and then
wait for it to come back up to re-test
point b and now this support area i
guess your resistance area then that is
when you can enter for another cell
position right there i should have
thought of that right yeah but it is
what it is it is what it is i just went
down here you can just see like price
just hit all my points so point a point
b and point c this trendline strategy
was magical but if you want to learn
more about a even magical or even
profitable high win rate price action
strategy you can check out this video
right here click on this video to find
out more welcome to the tribe and
remember you're just one trade away
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