Trade Stocks Trading

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Stock Trend Line Break

After stock 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 trading trend line has been broken.

 

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

 

Upstock trading trend Reversal

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

Stock Trend break and stock trading 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.

 

 

Downstock trading trend Reversal

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

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

 

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

 

 

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

 

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

 

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

 

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

 

  • Upward Market Direction Reversal - this stock trading signal is confirmed once the stock 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 trading signal is confirmed once the stock 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 stock trading setup with is the double tops and double bottoms stock trading chart patterns. Read Double Tops and Double Bottoms Chart patterns Tutorial.

 

This setup should already have formed before the stock trading trend break signal. Because these double tops and double bottoms are also reversal stock 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 trading signal appeared.

 

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

 

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