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Trendline Break (The Only System You Need)

  • Post# 1
  • Quote
  • First Post: Apr 10, 2009 9:20am | Edited Apr 22, 2009 9:21pm

Introduction
After many PM's, Emails, & any other possible ways of contact by what seems like the entire FF family; I've decided to share my simple trading system/strategy with you. For those who don't know me, my name is Josef (pronounced: Joseph) and I have been trading fx for over two years. I frequent the Eur/Usd thread as I only trade Eur/Usd. I chose to trade E/U because of the viable; business nature of the pair.

The Problem
Different strokes for different folks. While we all hold various skills and tools, we all are tackling the same problem. Unfortunately, one person's method may not help another. Oscillator Indications. For the most part I have a huge problem with putting them to practice on a live account. The reasons are of course, obvious. Though, I would never tell a person their system and/or indicator doesn't work. It's just that, Oscillator Indicators has never worked for me.

The Solution
Price Action. As some of us cringe at those two, little words, I totallty understand. I too, was one that didn't believe in Pure Price Action trading. After putting Price Action up to test, I found I understood the market better. I understood the why, how, and when of Price Action. What I've found is that a trader only needs Candlestick Patterns, Trendlines, and maybe Pivot Points.


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**** Revised **** Trendline Break System version 2.0
Visit POST #63 to view the revised strategy
http://www.forexfactory.com/showpost...7&postcount=63

Get a compiled version of Heikin Ashi
Visit POST #65 to download
http://www.forexfactory.com/showpost...5&postcount=65
  • Post# 2
  • Quote
  • Apr 10, 2009 10:26am | Edited Apr 11, 2009 1:27am

Overview
If there ever was an easier; modular system, this one is the one. The basic idea of trendlines comprises of many variables that must be taken in consideration when in use, such as, Trend Angle, Momentum, & Time. I'll let you in on a little secret on trading: its not as "random" as most would want you to belive. The market tends to trend either way and patterns occur more often than you think. I would invite you to study up on Market Movements and Patterns, Candlestick Reveral Patterns, and Trendline Uses. The Trendline Break system contains three individual variation; all based on personal preferences. One will be discussed in this thread. The other two will be discussed in a later date. One of the major problems with trading trendlines is that most traders do not know how to properly set and use them. Here is some readings on how to properly apply trendlines.
http://www.investopedia.com/articles...trendlines.asp
http://stockcharts.com/education/Cha...rendlines.html
http://www.incrediblecharts.com/tech...trendlines.php
A very good skill to hold is being able to read Candlestick Reversal Patterns. Here are some readings on how to properly read and react to candlestick reversal patterns,
http://stockcharts.com/school/doku.p...stick_bullish_
http://www.babypips.com/school/reversal_patterns.html
http://www.incrediblecharts.com/tech...ndlesticks.php



Tools of the Trade
1) Trendlines
2) Candlestick Reversals Patterns
3) Any Timeframe



Trading Strategy. As Simple as One, Two & Three
1) Find the upwards trend,
2) Apply the trendline,
3) Price Action breaks downwards through the trendline
Our first step is to locate a strong upwards trend. Apply a trendline to help visually spot out that trend and to use as an "barrier" for Price Action. Now we wait for Price Action to breakthrough the trendline and head downwards, in which a SELL order may now be entered. The chart below is an example of a trade setup we are looking for.

Attached Image (click to enlarge)
Click to Enlarge Name: Trend 1.png Size: 17 KB



Exit Rules
Now that we have an live SELL order open and locked in some green pips, our next focus should be to plan for an exit. Based on our knowledge of Candlestick Reversal Patterns, we will not only use this for entries, but for exits as well. To exit an open position, the trader must recognize candlestick reversal patterns and exit that trade accordingly.


Trade Notes
* Though, this system uses SELL orders only, technically you could appy this strategy to BUY order as well. SELL orders were chosen because of their quick; predictable nature of movement. At best, it's always best to practice trading one direction as opposed to two.
* Market volatility. This system may become useless under low volatile market conditions. Please take note of slow and/or erratic market movements as these conditions have the ability to produce incorrect trading signals.
* Limit Losses. As with any trading system, a trader must use discretion in limiting ones trading risks and losses.


Remember, the basic idea of this system is to keep it simple and focused by limiting equity exposure and offer a very focused trading strategy. This system includes an entry, exit, and simple price action tools; all that is needed for a trader to be profitable. Stay focused and always stick to the plan.
  • Post# 3
  • Quote
  • Apr 10, 2009 10:57am | Edited Apr 11, 2009 10:47am

Example
A example of a trade setup on a 1 Hour timeframe.

Attached Image (click to enlarge)
Click to Enlarge Name: Untitled - 1.png Size: 32 KB


Example of trade setups on 4 Hour timeframe

Attached Image (click to enlarge)
Click to Enlarge Name: Untitled - 2.png Size: 28 KB

Quoting Jhig
Live Example (cont'd)
SELL order closed out for a loss of 2 pips. (cost of spread)
*Note: No volatility. Maybe done for the day until Monday.*
---
Next week we'll discuss using the Trendline Break system with Pivots Points, Fibs, & Channels.
Thanks for the examples. Is this a sell only strategy?
Quoting aelimian
Thanks for the examples. Is this a sell only strategy?

Yes aelimian,
This is a sell-only strategy. We wait for a clear upwards trend and sell on teh retracement. You could look at this a Retracement Trading. I made and call many trades using this system. It's simple, functional, & focused ... lots of green pips earned trading this system.
  • hoss
    Joined Jun 2006
Couldn't you technically use this on longs, too? Couldn't you wait for the stochs to go below 20, set up a downward trendline and take the break out up?
Quoting Jhig

Yes aelimian,
This is a sell-only strategy. We wait for a clear upwards trend and sell on teh retracement. You could look at this a Retracement Trading. I made and call many trades using this system. It's simple, functional, & focused ... lots of green pips earned trading this system.
You're kidding, mhh? This works in both directions.
If sell works then buy should also work as you stated..my humble opinion from the logic..
Quoting hoss
Couldn't you technically use this on longs, too? Couldn't you wait for the stochs to go below 20, set up a downward trendline and take the break out up?
There's a common belief that sell-off happens faster and with more force than buying runs. Maybe he's trying to play off that belief the same way traders use fibs. Jhig?
" Average traders look to the left, great traders look to the right."
Short trades run much faster than Long trades, hence less chance of the trade going the other direction while you are not looking.

Hey, they have Gravity on their side. LoL

A simple De mark indicator will show you the trend break, project the TP and redraw the trendlines.
Starting to see instead of just looking.
Jhig,
Thanks for the system. Do you use anything else to filter the trades?
Yes, the Trendline Break system could be used for both Long and Short trades. I personally choose Short trades because of the fast nature of trading shorts, compaired to long trades.

The purpose of this system is to keep things short, simple, and sweet. Too many traders try and attempt to trade any and all movement in the market, hence over exposing their equity. Swing trading is NOT for everyone, but a focused system is. The basis of this system is to 1) pick a direction 2) find a clearly defined entry 3) collect the profits, all the while limiting ones exposure.

Remember, keep it simple. Trading is not complicated.
jhig will it work with a demakrk undicator that are mentioned by someone ?

trendlines are otherwise verry personal 10 persons can draw 10 different trendlines on the same chart ?



best regards
Jhig,

Do you wait for the candle to close below the trend line or do you wait for the PA to cross the trend line and if it is PA crossing the trend line then by how many pips.

How many pips is your SL and does this change on different time frames.

What is your favourite time frame...or most profitable.

Many thanks,

Billser
It's All About Attitude ...:peace:
Quoting Billser
Jhig,

Do you wait for the candle to close below the trend line or do you wait for the PA to cross the trend line and if it is PA crossing the trend line then by how many pips.

How many pips is your SL and does this change on different time frames.

What is your favourite time frame...or most profitable.

Many thanks,

Billser

Entry: Wait for Candlestick Reversal Patterns give us a reversal signal. Once a price action reversal has taken place, wait for price action to break the trendline downwards. Enter at the close of the candle that broke through the trendline.

My favorite timeframe is the 5min chart but this is a strategy that could be used on ALL timeframes. Apply this strategy to any timeframe you are comfortable with.

I'm not sure about using the De Mark indicator as I 've never used it, or heard of it.
I just love them trendlines Keep drawing and never stop
Quoting belekas
I just love them trendlines Keep drawing and never stop
Thanks Belekas,
I too love Trend Lines. Trend Lines are an important tool in technical analysis for both trend identification and confirmation. Using a Trend Line Break system, I can personally guarantee any trader can and will make money on a daily basis. Trend Lines work for any market; Stocks, Futures, Fx, etc. Take a look at this Amazon.com chart

Attached Image

http://stockcharts.com/school/doku.p...is:trend_lines Vist to learn more about Trend Lines

This chart show a perfect example of using Trend Line Break in the stock market. Price trends downwards then break through the trendline upwards for a 10 point profit.
Quoting Jhig
Thanks Belekas,
I too love Trend Lines. Trend Lines are an important tool in technical analysis for both trend identification and confirmation. Using a Trend Line Break system, I can personally guarantee any trader can and will make money on a daily basis. Trend Lines work for any market; Stocks, Futures, Fx, etc. Take a look at this Amazon.com chart

Attachment 231785
[font=Tahoma][i]http://stockcharts.com/school/doku.p...is:trend_lines Vist...
My trading is based on patterns and ranges so TL's play important role. Once you learn to identify i technically significant line, profit is just around the corner.
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