New Enhancement to Trend Line EA - Helps Spot Reversal Trades!

Jun 7, 2014

I have applied a small tweak to my trend line script whereby it now has the ability of detecting whether a currency has had X number of consecutive closes beyond it.

This has proved perhaps more beneficial in the lower time frames such as the hourly charts where price can close beyond a trend line and if the user has been strict on maintaining that once there is ONE close beyond the trend line to consider it broken (the trend line EA would then no longer keep plotting it).

An interesting example that I just stumbled upon when doing my weekly analysis was the CADCHF, have a look at how the new trend line performs:

[caption id=”attachment_1017” align=”aligncenter” width=”1024”]CADCHF bounces at support off of long-term support zone CADCHF bounces at support off of long-term support zone[/caption]

This supporting trend line has been in effect since the end of 2008 and yet has proved to be a good marker for the CADCHF:

[caption id=”attachment_1018” align=”aligncenter” width=”1024”]CADCHF trend line since 2008 has been a solid support zone. CADCHF trend line since 2008 has been a solid support zone.[/caption]

The enhancement of this feature is that it allows the trend line to continue to be plotted even when you have had many closes dotting above its life. This is perhaps more better seen in the lower time frames, such as the hourly charts. A recent reversal trade I spotted last night was on the NZDCHF as seen in this chart:

[caption id=”attachment_1019” align=”aligncenter” width=”1024”]NZDCHF holds resistance as trend line remains active even though many closes dot above it. NZDCHF holds resistance as trend line remains active even though many closes dot above it.[/caption]

Notice how the horizontal resistance line remained active even though we had a successful close beyond the trend line (as indicated by the first arrow). Due to the new enhancement of the trend line EA the trend line remains active and continues to show that this zone is problematic for the NZDCHF - which is confirms on Friday’s price action! (Confirmation is also somewhat similarly seen with the downward trending trend line too)

Anyway, hopefully this enhancement improves those who look for reversal points on the charts. Let me know how you go!


Related Posts

Three Good Reasons to be a Trend Line Trader

Price action traders love to draw them, love to predict the future using them and love to trade by them - yet few know how to properly use them. If you're anything like me you've come to a point in your trading career where you have a hit-and-miss approach when...

Why Do Horizontal Trend Lines Work?

Whenever you use an indicator or a trend line in your trading or analysis it’s always good to challenge your presuppositions. Many traders love an indicator because it looks nice or appeals to their taste, which may be a great way to start in trading, but unless your indicator or...

AUDNZD Caught Between Two Worlds

The AUDNZD seems caught between two worlds. Last week we saw a strong bullish move which showed promise of breaking it’s long standing resistance area that has been in effect since before Christmas last year. However, more effort is needed and it will be interesting to see how the AUDNZD...


All features contained on this site are for educational purposes only and should not be construed as specific investment advice. By viewing this website you understand and agree that or its authors do not offer or provide tax, legal or investment advice and that you are responsible for consulting tax, legal, and/or financial professionals before acting on any information herein.