Trend Line Break System

8/11/2019 Trend Line Break System

1/16

Weekly and Daily Charts

Bar-by-Bar

Learning to trade FOREX is akin to acquiring at least a 4 year college degree. For most their education

will be self-directed. Without a formal learning plan the vast majority of aspiring traders turn to the

internet in hope of discovering the right way to trade. A multitude of websites will be found all claiming

to be able to teach a proven method of trading the market. Few new traders will find their first trading

attempts profitable and so the journey through a forest of methods, systems and indicators begins. This

is the education most have endured. An aimless, hopeful yet necessary path.

The following analysis is presented in hopes of discovering a simple yet effective and profitable method

of trading. Only daily and weekly charts will be found. Analysis occurs from weekly to daily. As the

following charts are examined the reader will note that no method is proposed. Yet for the thoughtful

and observant the following charts contain all that is necessary to formulate ones own trading method.

Weekly EURUSD showing trend line break. There is a small pinbar preceding the trend break.


2/16

Zooming in to the daily chart a near DBHLC precedes the trend line break. The trend line break is clearly

retested.

There is a clear divergence seen on the daily.


3/16

A pinbar-like candle appears suggesting trend continuation.

The daily chart shows the weekly pinbar-like candle was a 38.2% retracement. An inside bar occurs. The

break of the inside barslow leads to continuation of the trend.


4/16

The down trend stalls and a period of ranging occurs. The range is for the most part contained below

the 23.6% fibo of the down trend. The range is broken by a BEOB.

In February 2005 a weekly pinbar is formed at the 50% fibo of the previous uptrend (fibo not shown).


5/16

Zooming into the daily chart that weekly pinbar breaks down as follows:

1.

Double daily lows

2.

Two inside bars

3.

BUOB

4.

Inside bar

Hindsight reveals in this case the double low and two insid bars heralded the end of this trend. The

BUOB was likely a confirmation. The last inside bars (a Friday bar) low was broke to the upside (new

week beginning) again confirming the new uptrend.

Of note the descending trend line is broken without a retest seen on this daily chart.


6/16

Continuing the new weekly trendline is broken as shown. The long term ascending trend line is shown.

Of note the red bar before the trend line break is an inside bar.


7/16

Going back to the price action before the trend break, the daily chart bears ones attention. As the new

trend continues upward the first bar is broken to the upside forming a large bullish candle. Price stalls

and ranges for a few days at the purple line which is a previous high. It is also very near the 61.8% fibo.

A daily pinbar is formed rejecting the previous high. There is a 38.2% retracement of the new uptrend

(fibo not shown although it happens to be at the 38.2 % retracement of the previous downtrend). This

retracement is broken by large bullish engulfing outside bar. Another inside inside bar is formed after

this large bullish candle which breaks to the upside.


8/16

At the top of the trend there is a near DBHLC followed by a DBLHC. The DBLHC does not go on to form a

higher high but rather a lower high. An inside bar forms after the DBLHC. It is broken to the downside

and the ascending trend line is broken and retested. Of note the purple horizontal line occurs very close

to the trend line break. After the trend line break price accelerates to the downside.


9/16

A weekly pinbar forms after price bounces from the longer term ascending trend line. The bounce

occurs very close to the previous swing low. The pinbar engulfs the previous candle.


10/16

The downtrend stalls followed by many days of ranging. There are couple of price action bars in the

ranging area but hindsight reveals they would have yielded little profit and perhaps a loss. Note the

ranging occurs between two previous swing lows.


11/16

The longer term weekly ascending trend line is broken. The break occurs near the two previous swing

lows. The broken trend line is retested. There is a bearish pinbar-like candle at the break.

There is a BEOB at the trend line break followed by a strong bearish candle that accelerates through the

previous swing low. The trend line break occurs but not impressively. The ascending trend line on this

daily view could be inaccurate.


12/16

Price action accelerates downward on this weekly chart. After the trend line break there are no lower

highs made. The descending trend line breaks after a series of indecision bars. The indecision bars

encompass a full month.


13/16

Examination of the daily trend mid way reveals several inside bars all leading to continuation of the

down trend. The inside bars seem to be nestled within flag-like structures (not delineated). A BEOB

does not lead to further downside. The last inside bar inside a large bullish candle (small retracement or

flag) does lead to further significant down side. Of note this downtrend can be contained within in a

not-so-perfect channel.


14/16

The end of the trend is highlighted by a clear MACD divergence. The first bullish pin bar is confirmed by

a small bull rally. A second pin bar ends the retracement of the bullish rally and produces another small

bull rally which ends after testing the upper trend line. A BUOB (not marked) ends the retracement of

this bull rally and the subsequent bullish price action goes on to break the upper trend line. The

descending trend line break is discretely retested followed by a new uptrend which seems to be

contained within a channel.


15/16

This weekly chart shows a bear flag which tops out at the 38.2% fibo of the overall down trend. The flag

begins after a TL break which is retested before price moves up. Within the bear flag there is a

significant retracement followed by the first IB which leads to continuation of this bear flag. An IB forms

at the top of the flag followed by a bearish candle and subsequent break of the flag to the downside.

The lower TL of the bear flag is retested before price moves down.


16/16

The daily view of the above weekly view reveals the first BUOB initiates the bottom trend line of this

bear flag. Subsequent bullish price action breaks the TL which is retested. After the retest of the TL

break a large BUOB forms followed by sluggish bull action which eventually confirms the top of the bear

flag. A little more than halfway through the bear flag a BUOB and BEOB are noted. The IB near the top

of the bear flag is a doji and does not appear on this chart. The IB breaks to the downside initiating a

strong bear rally that breaks through the bottom of the bear flag. There is a gap after the bear flag

break. Price closes the gap and retests the bottom of the bear flag before resuming the bear rally.

Documents

Trend Line Break System