That was a question I recently received from a member of our trading room. Differences between the horizontal line and the trend line ANGLE The first but very obvious difference is the angle of the lines.
It is, however, important to state the obvious as to reinforce the concept. But in practical real-life situations, trend lines never have Anything from 5 to 60 is most common. The vertical line has no particular use in trending unless used on the charts for remembering a particular time or part of price action. For the remainder of the article, we will, therefore, focus on the trendline and horizontal line.
How to Draw Trend Lines Correctly
We also have training on Trend Line Drawing with Fractals. A horizontal line could be placed at any support or resistance level that a Forex trader assesses as important.
In technical analysisa horizontal line is often drawn on a price chart to highlight areas of support or resistance.
A trend line, however, must have multiple touches to be considered valid. Horizontal lines also have more importance once price action respects that level multiple times but it is not a prerequisite for validity.
Horizontal Channel Definition and Example
A horizontal line that has one price point is a support or resistance. A horizontal line that has multiple points is a potentially stronger support or resistance and could be the top or bottom of a range. Also, read about the Trail Stop Loss in Forex. Trading breakouts have big advantages — primarily because traders avoid lots of moments where price action is indecisive.
Price action does tend to consolidate the majority of the time and trading breakouts give the advantage of entering when the market has a higher chance of moving in your favor.
Avoiding long drawn out sideways chop certainly helps that psychological battle.
But it also allows for optimal allocation of trading capital. There is a difference when trading trend lines or horizontal lines.
The angle is the primary focal point because there is also a difference between trading shallow trend lines, regular trend lines and steep trend lines.
Price usually corrects the angle of the trend before it continues with the trend.
What Are Trend Lines?
In general, these trend lines are great as a trailing stop and are an excellent method of making a profit upon a break. Some steeper trend line breaks do see a horizontal trend lines.
And trading those to the opposite side are profitable. This is primarily happening when a 4-hour chart is showing a trend and the smaller time frames are moving in a steep correction.
A break horizontal trend lines that steeper counter trend line has horizontal trend lines higher chance of succeeding. The market is showing exhaustion to one side by price is moving correctively in these cases as the angle suggests. A break of the trend line indicates the end of that corrective ir option registration. These trend lines, however, still have plenty of space towards the next bottom or top support or resistance and that is the primary reason why the breakout is often less volatile than trend lines with a shallow angle or horizontal trend lines.
The "stable" breakout will lead a good run in one direction before the currency bottoms or tops out on the lower time frames. Therefore using a tighter stop loss has a higher chance of succeeding here than in horizontal trend lines examples. At that moment there is a good chance of a hook back or pull back to the price level of the broken trend line. But only after a good size price moment has been made.
Both the breakout strike and pullback boomerang are trade setups which the Winners Edge Trading room employs. The market can hardly move away horizontal trend lines the top or bottom. The correction is very timid. A break of the trend line also indicates the end of that corrective movement but there is one crucial difference: tops and bottoms support and resistance are close by and this could make the breakout short-lived before price binary options time respects those levels.
In our trading room, we have a simple solution to making sure that we have an appropriate reward to risk when tackling these trades.
This helps take away the subjectivity from the decisions. Remember, always keep your approach to trading as simple as can be.
Due to this lack of space to the next support or resistance, price action often moves choppier than usual. Forex traders horizontal trend lines not willing to take a trade right in front of these horizontal trend lines so many up and downs are usually accompanied by this environment.
Our trading room also has guidelines on how the breakout should proceed. That could cause the unexpected and sudden opposite turnaround.
Selected media actions
Often enough the break of the horizontal level is accompanied with lots of volatility and sudden moves up and down. The breakout will see some follow-through but often enough this potential is limited as price action wants to hook back to the broken horizontal level. Very frequently the currency actually makes a retracement after this breakout. This retracement could even turn into a full-fledged horizontal trend lines. With horizontal levels, it is safer to trade the 2nd breakout or continuation trade setup, which in fact occurs when a breakout and pullback have already occurred.
Do you recognize the aspects of the horizontal line and trend line yourself during forex trading? What do you think of trend lines and their angle?
Let us know down below!
Have a great weekend and thanks for sharing the article!! Thank you for reading! Please leave a comment below if you have any questions about Horizontal vs Trend Lines! Also, please give this topic a 5 star if you enjoyed it! We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more.
Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow. I rather wait for the pullback and enter when price retraces. Boomerangs are what I'm looking for and it is one of the strategies I'm using since few weeks.
Using horizontal levels from the daily and weekly charts help me to filter some setups. Tks for this article. Cheers, Fabrice.