Hello and welcome to an educational video by ACY Securities. My name is Alistair Schultz and I'll be your host through today's trading journey. Today I'm going to be covering the phase of the market trend lines, trend channels and how I use them on a regular basis.
Now for the first thing I want to get through is about the phases of the market. Now there's really only three that you can potentially have. You have uptrend where prices obviously going up. You have downtrend where price is going down consistently or you have consolidation which is also commonly referred to as sideways bark at action. Now what is a trend line? At the end of the day, it is really just a line of best fit. There is nothing about a trend line that makes you unique or special as an indicator. It is purely your own intuition and where you see that price might have some support or resistance that you can fit that line to it.
It can provide you an opportunity for entries and exits, support and resistance lines and of course marking out price points like you see me do all the time in our other videos and of course mark out trend channels that are accommodating to those trend lines. Now I want you to think of an uptrend as this line here that I've got. Now the criteria for an uptrend is that you have a link between swing lows all working together. So if you can see on the chart we have a lowest, a higher swing low, another highest swing low, and as price progresses up it keeps on moving. Now the same thing can be said about a downtrend, however, it's the opposing effect. In the instance of an uptrend, you always draw your trend line from the bottom of price. On the downside, you look at it from the link of swing highs together.
So, as we go down price, we're looking for each new swing high to mark a line of best fit as it goes down. And of course, like I said, it's opposing to the uptrend. We draw the line from the top. Now if you have a period of consolidation like I've got marked out here for you on this chart, it's because you've got no new swing lows and no new swing highs. It might be because you've had a swing high and then a swing low and everything in between is smaller of the statue, meaning that you have no line of best fit. And the reality of it is that price ends up moving in a sideways pattern like this. Now ideally you want to try and draw on both sides of price and there are a couple of things that you can do with consolidation and still make trades journey, but we'll come back to that in a little bit.
So, when it comes to drawing the downtrend, the previous channel downtrend that I showed you, I have just applied it to be a trend channel now instead. So, all that's happened is I have copied the top line to the bottom and has provided another line of best fit. But now in this instance, you have a support line on the bottom and a resistance line to work with enabling you to draw your scoping on the chart a little bit better. On the outgoing side, it's exactly the same. I've moved the lower trend line, copied it and made it a resistance line as well as the support line that was already there.
Now how can we use it when it comes to consolidation? So this picture here is just a shorter timeframe of the previous one that I did and I showed you. And as you can see, those true lines are still there. They haven't moved, they're exactly the same, but you can obviously see a little bit more of price and a much more zoomed effect. Now when it comes to this, how do I think about it in a competitive period of consolidation? Well, I would look at the support line down the bottom here and think this might be an opportunity that we could take a long position on and try and trade it from this support line to the resistance line and vice versa the other way. So if we're at the top side, we can look for a short opportunity, whether that be through candlesticks and pattern recognition, or if you're using some level strategy or an indicator or even fundamental analysis, you can use this to give you a barrier of where you're going to be trying to trade price between. As soon as it exits the barrier, your consolidation is hopefully ended and you're going to be looking to get into a new trend.
So how about it when it's in a downtrend or an uptrend? Well, the same principle applies now, whilst it was in consolidation before and usually have a little bit of price variation and not a great deal of movement. The advantage of having it in a trend channel means that not only can you take one entry, you can actually pyramid your entries. So you might've seen at the very top left here, this yellow circles indicate an entry point and the red circles indicate an exit strategy or an exit point. You'd be trading it between this resistance line and the support line. In this instance, you might consider pyramid in your entries. So, you might've taken one light at the first circle. Then at the second circle you might consider adding 0.5 tour or whatever variation of adding into your money management strategy that you already have applied.
You could definitely use in this instance and the idea of this is to try and trade again between the support line and the resistance line. Now if you are going to be looking at the support and resistance line and trying to trade in between them, be mindful of how far the distance is between here and here. In this instance, it's 40 pips giving a really nice range for taking those entries, which allows you that each time you take one of these positions you might've been able to accumulate a further 40 pips than you would have normally.
Now, another method of entry and a method of trendline use that I wanted to show you today I've illustrated on the line behind me. Now, each of these coloured lines or the coloured trend lines are what we use sometimes when you're not quite sure where prices going other than having an overarching major line on the bottom or a bias already for you. In this instance, that bias is for a long position, so what would we do for it? Well, each time we find an opportunity that's going to be long. Then we can wait until we get it. Draw our trend line between each point, so maybe here and then here. Then we set our line to Ray and then from ray it allows us to see a lot more of where price might go. Every time price crosses this trend line. You exit your position, so you might get in somewhere down here and then try and exit here.
In this instance, you might enter somewhere around here and then you try and be trying to be exiting around here. Again, following suit on the same previous ones, you'd be trying to enter it around here and trying to exit somewhere around this point here and it continues suit all the way through. Now if you're running this, it's commonly known as a trendline break strategy. I have used them in the past and I do enjoy using them, especially on short timeframes because if you don't have much price action, you're not quite sure what the market's going to do. This is something that you can basically ignore everything else and just follow suit with it.
Even better if you can get some software coded to program some of these entries off your trend lines.
Now obviously apart from just using it to mark-up either for trend line breaks, trend line channels, your consolidation. There are other advantages and you would have likely seen in some of my other videos where I Mark up the charts for you to be able to see marking up your charts is an important tool, especially when you think about journaling it and keeping a record of what your trades were like in the week before. In doing so, it allows us to grow and further understand how the market might work and to understand your own trading style. So, consider using trendlines to mark-up patterns. Mark up your chart and mark up where you are taking profits entries and everything else along the way to help you further progress with your own trading skills. That's all the content that we have for today. I hope you've enjoyed the video. Now, of course, if you feel like speaking to me about any of the content that I've covered today, send me an email at talktoal@acy.com and of course, please give us a like and subscribe and you'll be able to perceive more great content from us in the future. Have a good trading day ahead and good luck.
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