Examples: Good Trend Lines vs. Bad Trend Lines
When the price breaks through a strong trend line, it goes further, offering you
a great profit potential. You can draw many trend lines in one single chart, but
there are several guidelines to choose only the strongest trend lines:
1. Prefer trend lines with more than two touching points.
(Trend lines become stronger the more times they are tested).
2. The touching points should not be too close together.
3. Longer trend lines are stronger than shorter trend lines. Longer
trend lines are also seen on the upper time frames, so more traders are
aware of them.
In the example above the touching points are very close together forming an
unreliable trend line. There is no other touching point on the rest of the trend
line.
In the next example below, the two touching points are not so close together,
but the trend lines are too short. A good trend line should be at least 50
bars long. There exist much better upper and lower trend lines in this chart as
shown in the previous page.
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