Principles of How Do I Draw Indices Trend Lines?
To draw indices trend line stock indices traders should use indices candles trading charts
- The points that are used to plot the trend lines are points that are along the lows of the stock indices price bars in an upward moving indices market. An upward indices trend move is defined by higher highs and higher lows on the stock indices price chart.
- The points that are used to plot the trend lines are along the highs of the stock indices price bars in a downward moving indices market. A downward trend move is defined by lower highs and lower lows on the stock indices price chart.
- The points that are used to draw indices trend lines are extremes points - the high or the low indices price. These stock indices price extremes are important because a indices price close beyond these extreme stock indices price points is interpreted as a stock indices signal that the trend direction might be changing. This is analyzed as entry indices signal or an exit indices signal.
- The more often a indices trend line is tested (touched) by the stock indices price but it is not broken, then the more powerful the stock indices signal of this trend line.
There are two main indices technical analysis methods of trading this indices trend line setup:
- The Indices Trend Line Bounce
- The Indices Trend Line Break
Technical Analysis Methods of Indices Trend Lines
Indices Trend Line Bounce - How Do I Interpret Indices Trend Line Bounce?
The indices trend line bounce is interpreted as a indices trend continuation signal. Indices trend line bounce is when the stock indices price bounces off the trend line to continue moving in the same direction of the trend line.
- In an upward indices trend - stock indices price will bounce upward after hitting this upward trend line level which is the area of stock indices price support area.
- In a downwards indices trend - stock indices price will bounce downwards after hitting this downward trend line level which is the area of stock indices price resistance area.
Indices Trend-Line Break - How Do I Interpret Indices Trend Line Break?
The indices trendline break - the trendline break is a reversal stock indices signal where the stock indices price goes through the trend line and starts moving in the opposite direction to that of the stock indices trend.
When a indices upwards trend line is broken - the indices market sentiment reverses & becomes bearish
When a indices downward trend is broken - the indices market sentiment reverses & becomes bullish.
For very strong indices trends, after a indices trend line break signal, the stock indices price will consolidate for some time before heading in the opposite direction. For short term indices trends then this trendline break reversal signal will mean stock indices price may reverse immediately after this indices trend-line break signal.
Indices trend line bounce and indices trend-line break are used in indices technical analysis based on technical analysis theory that these trend line levels represent support and resistance levels for the stock indices price movement.
Entry, Exit & Setting stops:
Indices trend line trading method is used to determine entry and exit points for indices trades, protective stop loss stock indices orders are placed just above or below these trend lines after stock indices trades are opened using indices trend line technical analysis methods.
The indices trend line bounce signal is a low risk entry indices trading method used by stock indices traders to place entry stock indices trades after stock indices price has retraced and is now bounced of a indices trend line and is now moving in direction of the stock indices trend. Indices trades are opened along these trend line levels and a stop loss stock indices orders placed just above or below these trend lines.
The indices trend-line break signal is an indicator of possible indices trend reversal. When a indices trend line is broken the stock indices price will start moving in the opposite direction. This indices trend-line break signal generates an early exit stock indices signal for stock indices traders to exit their open stock indices trades and take profit for these stock indices trades. When there a penetration of these trend line levels -indices trend-line break - this is a indices signal that the stock indices price can start moving in the opposite direction to that of the current stock indices trend.
Unlike other stock indices technical analysis indicators there is no formula used to calculate indices trend lines, this indices trend line formation is drawn between two chart points on the trading stock indices price chart.
How Do You Interpret Indices Trend Line Bounce?
