2021-09-23 23:38:38
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Trendline System
Trendlines can be more subjective than horizontal levels but they also work very well.
The screenshot below shows an overall primary uptrend and within the uptrend, the trader would look buying opportunities.
With the help of trendlines, one can identify consolidations effectively. When you can connect 3 or more highs and find a downward sloping trendline in an upward trend, a bullish breakout often signals a trend continuation.
All three points in the screenshot below show such periods where the sideways consolidation was defined by a downward sloping trendline. And each time, the breakout signaled the continuation.
Moving averages are an ideal filter for trendline strategies. Moving averages work best during trending phases and so do trendlines.
In the screenshot below, I added a 40-period moving average to the chart. For all 3 trendline breaks, the moving average also confirmed the trend direction. Not only was the price trading below the moving average for each signal, but the moving average itself was also pointing downward, confirming the trend direction, once the trendline break happened.
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