Trend Lines With Candlestick Patterns Can Be Powerful!

Trendline is one of the most easiest to understand technical indicators. Most of the charting software will automatically draw the trendline for you. You can use a bullish trendline and the bullish candlestick patterns to pick long entry points as well as confirm trends. In the same manner, you can use a bearish trendline in conjunction with bearish candlestick patterns for a short entry in the market.

When you combine a bullish trendline with a bullish candlestick pattern or a bearish trendline with a bearish candlestick pattern, you will get a pretty accurate signal that tells whether you should stick with a position or exit it.

When you spot a trend continuation pattern forming above or below a trendline, you can safely continue with your trade for more profits. In the same manner, when you spot a trend reversal candlestick pattern above or below a trend line, you should take it as a warning and exit an open position.

There are simple candlestick patterns and there are complex candlestick patterns. Now, there are candlestick patterns recognizer indicators available that you can install on your charting platform. These indicators can accurately identify a candlestick pattern. When you combine, this candlestick pattern with the trendline, you get a good confirmation about trend reversal and trend continuation.

You can also use trendlines and candlestick patterns to decide when to exit your position plus decide on the position of the stop loss. When you find price action to break a long established trendline, exit your position.

Trend lines have to be updated frequently. One stop loss strategy is to keep on changing the stop loss position daily when you draw a new trend line for the day. This way when the trend line changes daily, stop loss position is also updated.

A second method is to exit a trade when the closing price is below the bullish trendline or above the bearish trendline. This can keep you from having to replace the stops daily and also keep you in a trade if the price takes a slight dive during the day before it retraces. This provides a certain flexibility so that you don't have to see the trend continuing in the same direction after stopping you out of the market.

However, the price can dive and close much lower or higher than the trendline at the end of the day making your exit much lower or higher than if you had used a stop loss. It is up to you to decide which method fits your trading strategy and style best.

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