Revealing my SECRET Trendline Break Strategy

Summary

This 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

00:00

📈 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.

05:01

📉 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.

10:03

🔄 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.

15:04

🚀 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.

Keywords

💡Trend Lines

Trend lines are graphical representations used in technical analysis to identify the direction of a price movement. They are drawn by connecting at least two points of similar price levels in an uptrend (higher lows) or downtrend (lower highs). In the video, trend lines are the foundation of the trading strategy being discussed, indicating the price's historical behavior and providing potential entry and exit points for trades.

💡Uptrend

An uptrend is a term used to describe a general upward movement in price over time. It is characterized by higher lows and higher highs. In the script, the presenter explains how to draw a trend line in an uptrend by connecting higher lows, which is crucial for identifying potential buying opportunities and setting stop-loss levels.

💡Downtrend

Conversely, a downtrend indicates a general downward movement in price, marked by lower highs and lower lows. The video script describes how to draw a trend line in a downtrend by connecting lower highs, which is essential for spotting selling opportunities and determining entry points for short positions.

💡Trend Line Break

A trend line break occurs when the price moves beyond the boundary of the trend line, breaking the pattern of the existing trend. In the video, the presenter emphasizes waiting for a trend line break as a signal to potentially enter a new trade, highlighting the importance of patience and not entering immediately upon the break.

💡Rectangle Tool

The rectangle tool, as mentioned in the script, is a technical analysis tool used to highlight a specific area or candlestick on a price chart. It helps traders to visually mark and focus on the area where the price broke through the trend line, which is a critical step in the presented trading strategy.

💡Rejection

In the context of the video, rejection refers to the price's failure to maintain a new level after breaking a trend line, often indicated by a candlestick pattern that shows a lack of buying or selling pressure. The presenter uses the term to describe the price action that should be observed before entering a trade, ensuring that the breakout is not a false signal.

💡Stop Loss

A stop loss is an order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a position. In the script, the presenter discusses placing a stop loss above or below the breakout candle, depending on the direction of the trade, to manage risk effectively.

💡Take Profit

Take profit is the price at which a trader decides to sell a security to lock in a gain. It is a form of sell limit order. The video script describes setting take profit levels based on previous touches of the trend line, providing a method to secure profits as the price moves in the anticipated direction.

💡Partial Profits

Partial profits refer to closing a portion of a trade to secure some gains while leaving the rest of the position open to potentially capture additional profits. The presenter in the video suggests taking half of the profits at one take profit level and letting the other half run to another level, demonstrating a risk management technique.

💡Price Action

Price action is a method of technical analysis that relies on the interpretation of price movements to anticipate future market behavior. It is the primary focus of the video, where the presenter discusses using price action in conjunction with trend lines to make trading decisions, emphasizing the importance of understanding market structure and candlestick patterns.

💡Risk-Free Trade

A risk-free trade, as mentioned in the script, refers to a trading scenario where the potential for profit outweighs the risk, or where the stop loss has been moved to a point where any exit would result in a profit or breakeven. The presenter uses this term to illustrate the importance of managing risk and adjusting stop losses to ensure that trades can be exited profitably.

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