Trendline Bounce Trading Strategy: This strategy offers huge opportunities to get on board an ascending/descending trend at a good price levels. You have probably seen many pairs take off in one direction for a great amount of time but you didn’t get on board because of the fear of getting in too late. You fear that you will get in at the moment of price correction, which can to take out your stops before the underlying trend kicks in again. Well, this is a reasonable fear, and you have been hopelessly watching many pairs make new highs or lows, not sure when to get in and take advantage of those big moves.
Trendline Bounce Trading Strategy
Stategy #1: Buying At the Upward Trend line Support
When a low of the time frame reaches the support line without crossing it, you should be more confidence because that is a valid description of the trend. This is a test of supporting and encouraging traders to buy more after the price passed the test.
The Entry Rule:
You should buy when the low of the bar reaches within a predefined number of pips of the support trend line.
This predefined number of pips can be a fixed pip scenario (like within 10 pips above the trend line, just to make sure you can get in), or it can be based on a percentage of the Average True Range of the currency and time frame in question (such as 20% of the 12-period ATR).
Let’s look at an example of a recent chart of EURUSD on H4 timeframe:
Here You can see that the trend line started to form on March 28 2011 at the first significant low, and the next low had confirmed it. The third low, which is named Buy #1, which could be a nice spot for buyers to take up buy positions for a 50 pip gain, but for most other traders it would represent another confirmation point for the trend line support. aftter that point held firm, trendline traders would have drawn and highlighted the support trendline above, and put in buy limit positions at Buy #2, taking the EURUSD from 1.4065 up to 1.4220 (+150 pips). At that time, it would look like the trendline will never be touched again, as it was so far above. However, on April 1, the traders had charged back to retest this trendline one more time, at Buy #3, and when it held firm once again, they jumped in to shoot up the market from 1.4065 to 1.4220 (+150 pips).
It can be the nearest level of support or resistance according to Pivot Point Levels. Or it can be a easy option of choosing a fixed target appropriate to the currency and time frame; for instance, on H1 time frame, 40 pips for EUR/USD and 60 pips for GBP/USD.
You should Exit the buy position when the low of the bar falls below the support trend line by a predefined number of pips.
Strategy #1: Selling At The Downward Trendline Resistance
If a time frame touches the resistance line without crossing it, you should be more confident because that it is a valid description of the downward trend. This is a test of resistance and encourages sellers to sell more after the price passed the test.
The Entry Rule:
You should Sell when the high of the bar reaches x number of pips of the resistance trend line.
Let us look at an example of a recent chart on the USDCAD on the D1 time frame:
What you don’t see in the chart above is that the USD/CAD has been in a steep downtrend since March of 2009, falling from 1.26910 to 0.96435. I am starting the downtrend on the chart above for this year only. I start with a swing high on Dec 20, 2010, and get second swing high on Jan 31 2011, which allows me to form the downward trendline resistance. Trendline traders would have drawn the same trendline and taken short positions at the approximate area of the trendline. The first short position (Sell #1) came at Feb 10, 2011, at 0.9985, and it allowed traders to dive down to 0.9825 (+100 pips). The second short position (Sell #2) followed in the same month at 0.9958, and allowed traders to take the market to an even greater low of 0.9666 (+300 pips). The third short position (Sell #3) came on March 15 2011, and it would have been much trickier to stay on board with this one without getting stopped out. One would have entered around 0.9874, and the market had jumped up to a high of 0.9973, which would have meant you would need a greater than 100 pip stop loss to still be in the game. If you had managed to be still in the game, you would have seen the market fall lower to 0.9643 (+330 pips).
According to Pivot Point Levels It can be the nearest level of support or resistance. Or it can be a simple option of choosing a fixed target appropriate to the currency and time frame; for example, on H1 time frame, 40 pips for EUR/USD and 60 pips for GBP/USD.
You should exit when the high of the bar reaches above the resistance line by a predefined number of pips.
Please note that: because of the differences in trading conditions, all the forex strategies can not be applied to all broker platforms. So, Choosing Forex broker is a vital task. We would like to recommend you HYCM Broker. This broker has all the positive trading conditions necessary for any forex strategy to work. Read HYCM Broker Review to learn more.
Forex Trading Strategies
|Lesson 1||profitable Forex trading strategies|
|Lesson 2||Most popular trading strategies|
|Lesson 3||Forex Scalping Strategy|
|Lesson 4||Forex Trading Hedging Strategy|
|Lesson 5||Trendline Bounce Trading Strategy|
|Lesson 6||Forex Trading Breakout Strategy|
|Lesson 7||Pivot Point Reversal Strategy|
|Lesson 8||Pivot Point Break Out Strategy|
|Lesson 9||News Trading Strategies|
|Lesson 10||Marker Sentiment Analysis|
|Lesson 11||Pivot Points Trading Strategy|