How to make a profit with FTEC. Part 10. Is trendline trading strategy effective? 🤖
A trendline trading belongs to strategies which are plain and simple even for trading newbies because you don’t need knowledge and additional indicators when using this strategy. Today we’ll try to figure out if this strategy works accurately and if we can trade according to it without using other indicators of technical analysis.
As we’ve already mentioned, this strategy is quite simple and helps to determine trend direction and join the trend, finding the most profitable points to enter.
To build a line of ascending trend, it is enough to find 2 local minimums and put them together. In such case, the 3rd point, which is the closest to the trendline, will be perfect to open order.
But prompt entering the market is just half the battle. The time and place to set take profit and stop loss also play a key role. According to this strategy, take profit should be set at the level of local minimum (a kind of resistance level with which the price face when bouncing off the trendline).
This strategy also provides a clear instruction on how to set stop loss: you should set it at the level of the first local minimum that was used for drawing the trendline. Thus, we found and analyzed 20 situations when we could use the strategy. We provide all screenshots of found situations below.
On the basis of data analyzed, we can conclude that trendline trading strategy really helps to increase the effectiveness of trades. You can fully rely on it or use it as an additional tool.
The thing is that this strategy helps not only to get a profit but also to minimize risks, due to correctly chosen stop loss.
In 85% of situations we analyzed, the trend continued to the set take profit point. In other cases, we could minimize risks by setting a stop loss at the level of the first point, which forms the trendline.
As a result of our experiment, we made following conclusions:
Conclusion 1. Trendline trading strategy really helps to increase the effectiveness of trading and minimize losses.
Conclusion 2. This strategy provides a clear instruction on how to set take profit and stop loss so it doesn’t need additional indicators and can be used by a trader with any level.
Conclusion 3. If you work with small time frames, it is necessary to spend a lot of time, monitoring the price level.
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