Trade with the trend – that's an age old mantra that professional traders live by. If you trade with the trend, you're increasing the odds that your trades will be profitable.
But this is easier said than done. First, you'll need to identify the trend. Then, you'll need to identify the best trade entry points. Pro traders can easily do this without need for indicators or other special tools. However, for beginner traders, it can be challenging.
Setting up a trend line
Trend lines are used to chart the direction of a trend. The steepness of the trend line can help you have an idea about the trend's momentum. Steeper trend lines indicate that the price is moving fast in a certain direction.
To set up this indicator, start by clicking on the graphical tools feature on your IQ Option trading interface. Next, select either line or trend line.
Next, zoom your chart in and out to identify which time period shows the best trend. In most cases, a 1 hour to 3 hour chart with 5 minute candles will do.
Next, click on the lowest price and drag your cursor to touch all higher – lows with a straight line if it's an uptrend. Note that the trend line doesn't have to touch all higher – lows. It just needs to connect at least 2 higher – low points to chart the trend. If it's a downtrend, your trend line should connect lower – highs.
The chart below shows a trend line drawn along an uptrend.
Adding support and resistance to your IQ Option chart
Now that you've set up your trend line, your next step involves adding support and resistance levels. These are simply price ranges where retracement and consolidation occur. The resistance is the upper line along an uptrend where prices tend to reach before bouncing back. It's the lower ling in the case of a downtrend. Support is the lower line along the uptrend where prices don't seem to fall below for a given period. It's the upper line in the case of a downtrend.
Support and resistance ranges are always changing. Once the price breaks out of a support or resistance level, new support and resistance levels are created.
Now let's look at an example.
Using the chart below, the Lower most horizontal line is the support (for the uptrend). It eventually becomes the resistance when the downtrend starts developing.
The middle horizontal line forms a strong resistance along the uptrend. Notice how many times the price hits this level and bounces back down before breaking out to continue the uptrend?
The uppermost line forms the resistance for the uptrend.
Next, we'll look at how to enter trade positions based on these three lines.
Now that you've learned how to trade using the trend line alongside support/resistance, I urge you to try out this strategy on your IQ Option practice account. We'd love to hear about your results in the comments section.
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