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Simple aproach to trade trend lines effectively on IQ Option


Trend line trading on IQ OptionA trend line is an additional line drawn on the price chart that shows the inclination on selective series of candles. It is commonly used by traders and it helps in carrying out market analysis. Today, I would like to describe a strategy that is based precisely on the trend lines.

The basics of the trend lines

In order to draw a trend line, you have to look for the lows and highs on the price chart. When you spot a low, then high and then a higher low, you will get a trendline by connecting the lows. Such a situation happens on the uptrend.

You can draw a trend line during the downtrend when you notice high, then low and lower high afterwards. Join highs and you will get a trend line.

Once you have a trend line drawn on your chart, what you are waiting for is the third touch of the line by a candlestick. This is in fact a place where you can open a trading position.

The below sketch presents the trend lines in both, uptrend and downtrend.

the best place to buy and sell on the trend line
Where is the best place to buy and sell on the trend line

The first and second points help you to draw a trend line. At the third touch during the uptrend, you can buy, and during the downtrend, you can open a sell transaction. Using additionally a candlestick pattern would be wise. It can be a wicked candle or an engulfing candle.

Opening a short position with the trend line trading strategy

Let's look at the exemplary AUDUSD chart below to illustrate how you can use the trend line trading strategy to open a short position.

Short position example with long wick on the trend line
Short position example with a long wick on the trend line

You spot the high (1), then low and the lower high afterwards (2). This allows you to draw a trend line. The price continues to fall. Now you wait for a pullback to the trend line. The wicked candle appears on the trend line. This is a signal to enter a short position.

Place a stop loss just above this wicked candle that has signalled the trend entry. Take profit should be set at the level of the previous low.

high reward to risk ratio
You should choose trades with a high reward to risk ratio

In this example, there is quite a high reward to risk ratio. Such a setup is the most wanted one.

Opening a long position with the trend line trading strategy

Let's move to the example of opening a long trade. The first low (1) and the second higher low (2) determine your trend line. Now you only have to wait for the third point which is the pullback to the trend line with the wicked candle developed on the support. You can open a long transaction here.

Your stop loss should be placed just below the wicked candle and you should target the previous high. Again, in our example here we receive a really favourable reward to risk ratio.

Long position example with long wick on the trend line
Long position example with a long wick on the trend line

Conclusion

The trend line trading strategy is quite simple in use. The most important step is to identify the trend and draw a trend line properly. Then, you just have to wait for a pullback to the trendline and a wicked or engulfing candle formed on the line.

Set a stop loss below (or above, depending on whether it is the uptrend or downtrend) the wicked candle and target the previous high (or low). This will help you to estimate the reward to risk ratio. The higher it would be, the better.

I encourage you to go to the IQ Option demo account right away and draw a trend line. Use today's simple strategy to open transactions effectively.

Share your thoughts with our community. You will find the comments section further down the site.

I wish you profitable trades!

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