I always post here, that we should wait for breaks, or confirmations. Breaks of key levels of support and resistance, or trend lines, so I will tell you the basic rules to trade with trend lines, hope you enjoy some more of this basic education tips!

As you may know, we always say that is better to trade following trend. This means in a bullish market we must buy to take profits by selling. Of course we can trade against the trend in fact I do it all the time, but we must be aware that against trend, movements will have less strength and probably be shorter, meaning the number of pips accomplished will be less that following the trend.

But of course, while a trend line remains unbroken the market trend is consider still valid. If we are working with daily charts, (the example is valid for any time frame of course) and during that session price pass the line but then close above it we shouldn’t consider that a break and we will wait for a confirmation. When the session close under an ascendant trend line, we are on our way: now, we will have to add a filter, like as example, the percent meaning, ok, line is break, but still we will have to wait until that break reaches the xx %; or time filters, like wait till at least one more session close under the line. These kind of filters are subjective and so will depend on each trader decision, but is important to use at least one that helps us confirming the new trend. On the other hand, filters delay signals, so we should not use more that one, may be two because we will find out we are getting into market to late.

So in a bullish market, we must buy every time price reaches the ascendant trend line, but if price breaks the trend line, we must stop buying: we buy waiting for a rebound, and when the line is broken as it will sooner or later, well we must close the position and assume the lost. See is highly possible that we take more profits during the trend duration, and so, a small loss will not affect our winnings.

Primary trend, Secondary trend and correction movements

Generally, inside the same chart, you can see different trend lines. One of them will probably define primary trend, others the secondary and so on.
In any big chart, daily or weekly, we see there are corrective movements that in fact are small descendant trends of a minor range. In smaller charts, like one hour ones, we will find out that there are small bearish trends against the bullish major one. So how can we solve and understand all these lines? Well the question here is to use one basic rule: We set our primary trend in the following bigger chart that the one we use to trade, meaning if you trade 1 hour charts, you set your trend lines in 4 hours chart.

In case we are daily traders, meaning we use daily charts to analyze a buy or sell signal, then we will have to define our primary trend in a weekly chart. If the weekly trend is bullish, we should try to trade buying, taking advantage of valleys or corrections we can see in daily charts.If we work with one hour charts, then we must look for the primary trend at daily or 4 hours charts, and use valleys and corrections of one hour to trade.

 I won’t extend longer not to bore anyone, yet if you like this readings, let me know, and I will add one or twice a week.