Trendlines When Combined With Candlestick Patterns Can Be Powerful

Trendline is one of the most easiest to understand technical indicators

. Most of the charting software will automatically draw the trendline for you. You can use a bullish trendline and the bullish candlestick patterns to pick long entry points as well as confirm trends. In the same manner, you can use a bearish trendline in conjunction with bearish candlestick patterns for a short entry in the market.

When you combine a bullish trendline with a bullish candlestick pattern or a bearish trendline with a bearish candlestick pattern, you will get a pretty accurate signal that tells whether you should stick with a position or exit it.

For example there are bullish and bearish candlestick trending patterns like the bullish or bearish neck line pattern, bullish or bearish thrusting line pattern, bullish or bearish meeting line pattern etc that confirm the continuation of a trend. When you spot these candlestick patterns appearing above or below the trendline, you can safely continue with the long or short trade that you have initiated.

There are simple candlestick patterns and there are complex candlestick patterns. Now, there are candlestick patterns recognizer indicators available that you can install on your charting platform. These indicators can accurately identify a candlestick pattern. When you combine, this candlestick pattern with the trendline, you get a good confirmation about trend reversal and trend continuation.

Trend lines are easy to draw. Many charting software do it for you automatically. You can also draw them yourself. Whatever, trend lines can be used for making exit decisions as well as about where to place the stop loss. Where you place the stop loss is very important. Trend line can help you in deciding where to place the stop loss.

The problem with trend lines is that they change often. Everyday, you will have to draw a new trendline. One method of placing a stop loss is to use a support trendline or a resistance trendline and place the stop loss just below or above it.

A second method is to exit a trade when the closing price is below the bullish trendline or above the bearish trendline. This can keep you from having to replace the stops daily and also keep you in a trade if the price takes a slight dive during the day before it retraces. This provides a certain flexibility so that you don't have to see the trend continuing in the same direction after stopping you out of the market.

Whatever, trend lines when combined with candlestick patterns can be powerful.

by: Ahmad Hassam

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