Highlights ①. Gate's "Basic Futures Courses" course introduces various methods of technical analysis that are commonly employed in futures trading. These courses aim to help traders establish a comprehensive framework for technical analysis. Covered topics include the basics of Candlestick charts, technical patterns, moving averages, trend lines, and the application of technical indicators. ②. This piece mainly introduces how to decide the entry and exit points using trend lines, as well as their other applications in trading.
1. Use of trend lines A trend line is an imaginary line that traders sketch following specific guidelines. Serving as a prevalent instrument in technical analysis, it aids in evaluating the market by showcasing the trajectory and intensity of price fluctuations. Comparable to moving averages, it is useful for validating and forecasting market tendencies. However, it shares the same drawback as moving averages in that it tends to react belatedly to actual price changes.
2. Decide on entry points Trend lines can suggest important entry opportunities and timing for increasing positions, especially in a bull market. Good use of trend lines can improve the efficiency of position management. The specific rules are as follows:
①. Should the price of a currency breach the long-term descending trend line and subsequently, even in the event of a decline, it does not dip beneath the medium ascending trend line, or if it does decline but fails to penetrate both the long downward trend line and the medium upward trend line, this behavior could indicate an opportune moment to purchase assets.
②. If the currency price runs above the long upward trend line for a long time and then breaks above the medium downward trend line, it suggests timing of opening long positions or increasing positions.
③. If the currency price runs above the long upward trend line for a long time, then after a sharp decline, it increases to breaks through the short downward trend line, it suggests timing of opening long positions or increasing positions.
④. If the currency price runs above the long upward trend line, and even if it pullbacks, it rebounds again before it penetrates through the long upward trend line, it suggests timing of opening long positions or increasing positions.
⑤. If the currency price runs above the long upward trend line, and even if it pullbacks, it rebounds again before it penetrates through the medium upward trend line, it suggests timing of opening long positions or increasing positions.
3. Decide on exit points For positions management in a bear market, trend lines can help determine exit points, i.e. helping figure out timing of exiting and shorting positions. The principles are as follows:
①. If the currency price falls below the long upward trend line, it is time to sell out assets.
②. If the currency price runs above the long-term upward trend line for a long time and then falls below the medium upward trend line, it is time to reduce your positions.
③. If the currency price runs above the long upward trend line for a long time, then after a surge, it pullbacks to get below the short-term upward trend line, it is timing of reducing positions.
④. If the currency price breaks above the long-term downward trend line, then it pullbacks to get below the mid-term upward trend line, it is timing of reducing or exiting positions.
⑤. If the currency price keeps running below the long-term downward trend line, it is time for exiting positions.
4. Summary
Trend lines play a crucial role in identifying when to enter or exit trades. However, relying exclusively on one tool for trading decisions is not advisable. In practice, it's recommended to employ trend lines alongside other technical analysis techniques like candlestick patterns and indicators, which can provide a more comprehensive view of market trends and help inform trading strategies.
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Disclaimer This article is for informational purposes only and does not constitute investment advice. Gate is not responsible for any investment decisions you make. Content related to technical analysis, market assessments, trading skills, and traders' insights should not be considered a basis for investment. Investing carries potential risks and uncertainties. This article offers no guarantees or assurances of returns on any type of investment.
