Trade Stocks Trading

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Stock Trend Line Break

After stocks price has moved in a certain direction for an extended period of time within a channel it reaches a point where it stops moving within the channel. When this happens we say that the stock trend line has been broken.


Since the line is the point of support or resistance then we expect the stocks trading market to move towards the opposite direction. When this happens traders will close the stock orders which they had bought or sold. This is called taking profit.


Up Stock trend Reversal

When stocks price breaks upward line (support) the stocks trading market will then move down

Stock Trend break and stock trend Reversal


This signal is considered to be complete with the formation of a lower high or a lower low. This also provides a trading opportunity to go short once it is broken.



Down Stock trend Reversal

When stocks price breaks downward line (resistance) the stocks trading market will then move up

Down Stock trend stock trend Reversal

Downwards Channel break


This signal is considered to be complete with the formation of a higher low or higher high. This also provides a trading opportunity to go long once it is broken.


NB: Sometimes when stocks price breaks its stock trend it might first of all consolidate before moving in the opposite direction. Either way it is always good to take profit when the stocks trading market direction reverses.


To trade this stocks trading setup as a stock trader once you open a new trade in the direction of the stock trend reversal the stocks price should immediately move in that direction, in a stock price breakout manner. This means that the stocks trading market should immediately move in that direction without much of a resistance.


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If on the other hand the stocks trading market does not immediately move in the direction of the stocks price breakout then it is best to close out the trade because it means that the stock trend is still holding.


Another tip is to wait for the stock trend line to be broken and for the stocks trading market to close above or below it so as to confirm this stock signal.


What happens is that most traders open trades waiting for a reversal even before the stock trend is broken, only for the stocks price to touch this line and for the current market direction to hold and stock to continue with the current market direction.


Therefore, when trading this stocks trading setup it is best to wait until the breakout has been confirmed by stocks price closing above or below the stock trend line, depending on the direction of the stocks trading market.



  • Upward Market Direction Reversal - this stock signal is confirmed once the stocks trading market closes below this upward line, this should be the correct time to open a sell short trade, so as to avoid a stock trading whipsaw.


  • Downward Market Direction Reversal - this stock signal is confirmed once the stocks trading market closes above the downward line, this should be the correct time to open a buy long trade, so as to avoid a stock trading whipsaw.


Combining With Double Tops or Double Bottoms Stock Trading Chart Patterns

A good trade setup to combine this stocks trading setup with is the double tops and double bottoms stocks chart patterns. Read Double Tops and Double Bottoms Chart patterns Tutorial.


This setup should already have formed before the stock trend break signal. Because these double tops and double bottoms are also reversal stocks trading signals, then combining these two setups will give the stock trader a good probability of avoiding a stock trading whipsaw.


In the above chart screenshots these stock trading setups can be confirmed to have formed even before the reversal stock signal appeared.


First Example of Upward Direction Reversal - the Double tops chartpattern had already formed before the stock trend break signal appeared on the stocks trading chart.


Second Example of Downward Direction Reversal - the Double bottoms stocks chart pattern had already formed before the stock trend break signal appeared on the stocks trading chart.


Double Tops Double Bottoms Combined With Stock Trend Line Breaks Reversal

Double Tops or Double Bottoms Combined With other Reversal Stock Trading Signals

 

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