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Thread: Trendline Forex Entry Signal - Two High Probability Setups

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    Default Trendline Forex Entry Signal - Two High Probability Setups

    A reliable Forex entry signal usually involves a combination of factors which all come together at the same time.

    No single indicator can provide the ideal entry level and the new Forex trader has to grapple with this stark reality. Many find this hard to accept and spend countless weeks and months and hard earned cash in search of what could be termed the 'holy grail.'

    Learning to trade the Forex is hard work and needs to be treated like a business, the same as any other business. It requires a large investment of time, energy, mental discipline, and a cautious investment of cash until the necessary skills are acquired.

    Trendlines are just one of the tools seasoned traders use along with other indicators to provide a reliable Forex entry signal.

    Here we spell out two distinct ways in which trendlines can be used safely. Using a higher time frame candlestick chart such as a 60 minute, 4 hour, or even daily chart, a trendline is drawn along the most significant lows in an uptrend or across the most significant highs in a downtrend.

    1. Momentum Combo

    As price moves upward in an uptrend or downward in a downtrend, it will retrace and bounce off the trendline at certain times. However, using a trendline bounce by itself as a Forex entry signal is too risky. There have to be other factors.

    Once you have drawn the trendline you now have a graphical representation of price movement and you will be able to see where price has to retrace to test the trendline once again.

    Now use other indicators to see if that level where price would need to retrace to test the trendline combines with other factors.

    Calculate your daily pivot points and draw horizontal lines on your chart to mark them.

    Run your eyes left on the chart and note if there were any significant highs or lows that formed support or resistance within the last few days. Support and resistance on higher time frames usually provide more substantial reference points.

    Use the Fibonacci tool on your charting software and mark retracement and/or extension levels on a variety of swing highs and lows and see if any intersect the trendline.

    Also make sure you have the 200 EMA (Exponential Moving Average) line shown on your charts and note whether this also intersects near or at the trendline.

    Now if you have a combination of two or three of the above indicators meeting at the same place you have now identified a Forex entry signal that can be regarded as high probability.

    Put in your entry order to be take in long at this point where the trendline intersects with the other indicators and set a reasonable target limit for what probably will be a profitable trade.

    For a downtrend, simply use the above indicators going the other way.

    2. Break Combo

    The second way to identify a reliable Forex entry signal using trendlines is to watch for a break of a trendline on a higher time frame such as the 60 minute, 4 hour, or daily chart.

    Some traders sent an entry order to go long or short once price has broken the trendline by a few pips. That works for some.

    There is however a safer way to trade a trendline break.

    It will be observed that often (not always, nothing is absolutely certain when trading the Forex) once price has broken a trendline and moved 15-30 pips, it will come back, retrace, and test the backside of that trendline.

    This is where again you use the combination of factors mentioned in the previous strategy.

    Look to see if the point at which price may come back to test the backside of the trendline coincides or combines with factors such as:


    Pivot points
    Previous swing highs or lows marking support and resistance
    Fibonacci retracement or extension levels
    200 EMA
    Now when you place an entry order to be taken in at that level you are doing so on the basis of a clearly defined Forex entry signal.

    For a graphical example of the above, see the resource box below.

    Be aware that trading trendline signals on lower time frames such as 30 minute, 15 minute, or even 5 minute charts are very high risk trades. Price will break these short term time frames frequently during the course of a day and catch a new trader frequently by luring them into a trade they later regret.

    Be patient and wait for things to setup as described in the two methods above for high probability trades triggered by a combination Forex entry signal.

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    I could not see your resources box below your articles. Could you pls tell the site pls.

    Nic

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    well i want a site where i can be getting forex commentary pls.

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    Quote Originally Posted by hakeembolaji View Post
    well i want a site where i can be getting forex commentary pls.
    Integrated forex commentary is included in my chat room which is open to all FX Open traders, not just my own clients.
    http://www.rebatefx.com/chat.php
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    am i wrong but are trend lines basic supp;y and demand lines?

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    Sometimes analyzing for trend lines for more than one time frame does help. I have been saved from loss numerous times because, as the saying goes, the price always moves in favor of long-term trend

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    are those two mentioned above the only way to know a good entry point?

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    Quote Originally Posted by umaranjum View Post
    Sometimes analyzing for trend lines for more than one time frame does help. I have been saved from loss numerous times because, as the saying goes, the price always moves in favor of long-term trend
    Different trend lines should be analyzed on different time frames and that too higher times frames and when the signals from all trend lines is same then a trader can go ahead and perform their trades .

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    using a trend line as a tool to analyze price movements are usually done if the price trend line break out of it then do the open position by following these prices you should use a stop loss but also to minimize losses in the event of a reversal of the price of a sudden.

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    Not all trends should be followed. Some trends are weak, that is why you notices weak breakouts too

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    trend line usually used by naked trader its so simple but there is false signal too, sometimes after break the line the price not continue the movemnet but its pullback again

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    Quote Originally Posted by umaranjum View Post
    Sometimes analyzing for trend lines for more than one time frame does help. I have been saved from loss numerous times because, as the saying goes, the price always moves in favor of long-term trend
    You are right, its very important to always look at the longer time frames and then come to the lower time frames to trade on. Often a move on the up side on 1H time frame may only be a spike on 4H time frame.

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