I have received emails from readers of this blog asking me to showcase more examples of my forex trend line strategy at work and therefore I decided to setup this section on this blog to show you examples of forex trend line strategy happening on various different currency.
What Is Forex Trend Line Strategy
It is the trading of currency with the help of long term, medium term and short term trend line. Whenever there is a valid breakout of the short term trend line, it will always move towards the medium term trend line. Once it manages to break the medium trend line with valid breakout, it will always moves towards the long term trend line.
What we are doing in this forex trend line strategy is to be able to draw the correct short, medium and long term trend line and then wait for the price to break the short term trend line. Once you manage to validate the trend line break, you will enter a trade in the direction of the breakout and then place your target profit at the medium term trend line.
Once the price breaks the medium trend line with valid breakout, you will then enter another trade with the long term trend line as the target profit.
Below is a case study of the forex trend line strategy at work for the month of July 2011 on the GBPUSD.
Take a look at the picture above, you can see that there are 3 lines and they are namely Short Term Trend Line (RED), Medium Term Trend Line (BLUE) and Long Term Trend Line (BLACK).
Discussion on the Case Study
You can see that there is a valid trend line break on the short term trend line and what we will do is to enter a trade and then wait for the price to hit the medium trend line for an exit.
Once the price hits the medium trend line, it will usually retrace back. Can you see that I have circled a fake out which is something very common in trading. The fake out are what usually causes new traders to lost their money.
From the trend line strategy course, you will learn how to tell a valid breakout from a fake out and this is what you will avoid.
Sometimes later, there is a valid medium term trend line break where you can enter a trade. This time, you will wait for the price to hit the long term trend line and then you exit your position.
In the trade above, there is a profit of 200 pips. I will continue to showcase other examples of my forex trend line strategy at work.