In many ways, identifying a trend alone on Binomo isn’t a very difficult task. Knowing when it is the best time to enter a trade is a whole other matter, however. Such skill usually only develops after a months or years of experience.
Indeed one of the most pressing problems that many traders encounter when they first start their trading journey is how to find the right trade entry point alongside a trend.
In this guide I will show you how you can have an easier time simply by using 2 indicators. These indicators can not only help you make profitable trades, but also earn money from trading in general.
What’s a trend level signal?
Trend level signal (TLS) is a tried and tested method that many successful traders have been using for decades.
The first time I heard about this method was from a reader who shared with me via an email their derivatives trading strategy for turning $100 to up to $249, given the capital loss risks. After trying out the strategy myself I realized that it is indeed profitable – which is why I’m sharing it with you today.
Using the TLS method I’ll show you how you too can turn $100 to up to $249, given the associated risks, in no time at all. I’ll be using my Binomo account to trade the EUR/USD currency pair.
Here we go!
Trend Level Signal conditions
Before we begin, keep in mind that there are three conditions that you must first meet in order to get this trading strategy to work.
- There has to be a clear trend.
- There has to be an easily identifiable level, like support or resistance in this case.
- There also has to be a clear trading signal. The exact signal varies from situation to situation. It could be a pin bar candle that shows a start of a trend after price consolidation. It could be a large-bodied candle that shows strong buying or selling activity.
Trading using TLS on the EUR/USD pair
Take a look at the screenshot below showing my Binomo screen where I’m trading the EUR/USD currency pair in 5 minute intervals. As you can see there is a clear uptrend that eventually becomes exhausted and reverses into a strong downtrend. The green line shows the uptrend while the red line shows the downtrend.
This is why the very first condition is to identify if there are any clear trends. With a clear trends traders can trade at almost any point along it, as long as it’s not exhausted. Since clear trends offer many trade points, it’s the most important condition for the TLS strategy to work.
Identifying trade entry points
When it comes to the TLS strategy, the main objective should be to identify which trade entry point along the trend is the most suitable one for you. First of all start drawing a trend line. If it’s an uptrend, there should be at least 2 high-lows on the trend line. If it’s a downtrend, then there show be at least 2 low-highs.
Once you’ve finished drawing your trend lines, you should then identify support and resistance levels. A lot of times, these are the points where price consolidation happens before a trend could form.
Here’s an image to better describe what I’m talking about.
In other words, if you’re riding an uptrend, you can use the RSI indicator to notify you in case there’s a downtrend that starts to develop. You can see in the chart below that the blue circle on the RSI indicator coincides perfectly with the large bearish candle encircled on the candlestick chart.
Why should you use an RSI indicator?
Other than the above reason, RSI indicators can also help you avoid any possible false breaks. False breaks can be defined as the moments where prices may temporarily reverse before going in the same way as before.
Let’s say you’re following an uptrend when you notice that it’s suddenly becoming a downtrend, so you change your strategy halfway through. Maybe you decide to enter a sell position to cut your losses before it’s too late. Unfortunately, it was just a false break, a small dip in the market. In the end it becomes an uptrend again and you’re left with the wrong decision – and a losing trade.
This can mess up the strategy and even cause you some losses, so you’ll want to avoid them as much as possible.
If you want to learn more about trading using trend lines, you can read our Ultimate Guide To Trading Using Trend Lines On Binomo.
You can also use our Trading Guide: RSI and Support / Resistance on Binomo to help you understand these two indicators better.
Identifying trade entry points example
After drawing the trend line and setting up my RSI indicator I can now start actually identifying all my possible trade entry points.
By using the trend line in this example, I managed to identify a total of four possible trade entry points, as indicated by the four green circles above. The RSI indicator below also coincides with the bullish areas which suggest that there would be a trend continuation.
Using support and resistance to identify possible trade entry points
We’ve already established that you can use the RSI indicator to notify you when a possible trend reversal is going to happen. That is, as long as a trend is strong. Once a trend starts approaching exhaustion,you’re going to have a hard time even if you’re using the RSI indicator.
When this happens it is the perfect time to use support and resistance levels to guide you in your trades.
Here’s a good example. When prices touch the resistance line, that’s the time that they will typically fall since prices don’t usually break resistance. But in case the uptrend continues, that when it’s time to use check the candles to see what’s going on.
You’ll see that after the prices break the resistance, another bullish pin bar develops. This means that the uptrend is going to continue, suggesting that it’s still a good time to enter a buy position.
You can also use the same tactic when it comes to support lines. Once prices fall to the support line, it usually means that the trend is likely to become an uptrend. Check if a bullish bar will develop once the prices reach the support line, since this can suggest a trend continuation.
How to trade during trend reversals
As with anything, uptrends don’t always last forever. As you can see here, after a while, the uptrend eventually becomes exhausted. You can use the support line to notify you ahead of time so that you can prepare.
Look at the chart below. After going through an uptrend, it eventually becomes exhausted. However, it didn’t immediately happen. At this point, if you were simply relying on the RSI indicator, you might not have even seen it coming. If you did use support/resistance as your indicator though, you’ll see that there’s a possible trade entry point.
Here’s a tip: if you encounter a chart like this one, one of the best points to enter a sell position is after at least two bearish candles develop, especially if it’s followed by a second stronger bearish candle. If you see small retrenchments, wait for a bit first until you’re completely sure that you have a good chance of making a successful trade.
How to turn $100 into up to $249 on Binomo
Do you know how successful traders manage to have hundreds of thousands of dollars in investments? That’s because they’re always reinvesting their profits. Every time they earn money from trading, they simply add that money to their existing pool of investments. Over time, as they make more profitable trades, this adds up to a lot of money.
Here’s a table to help explain it better:
As you can see, by investing $100 and consistently reinvesting the profits from all my trades, I eventually managed to save up to $249 in investments after just 4 trades, given the associated loss risk.
My first investment was $100. I earned $82 from that first trade, so I reinvested all of it. My $82 then earned me $67.24 which I again reinvested and earned $55.14 from. Finally, my fourth and last trade turned my $55.14 into $100.35. If you add it all up, that means I earned a total of $249.24 just by investing an initial $100.
Of course, there’s never a guarantee when it comes to trading. You can even say that I was “lucky” enough to have gotten four successful trades one after the other. After all, most beginner traders encounter a loss after their first couple of trades, if not on their very first one.
However, if you use the Trend Level Signal method that I discussed above, you’ll be reducing your chances of entering a losing trade and greatly improving your chances of profiting on your next trades.
Again, TLS is a rather simple method that even beginner traders can use.
- One, use a trend line to confirm the trend you identify.
- Two, use the RSI indicator to check if there are any potential trend reversal points.
- Three, use support and resistance lines to help you determine possible entry points.
Do take note that this is merely a suggestion for money management. Other traders prefer just investing a portion of their profits and pocketing the rest. Ultimately, it really depends on your personal preferences, your risk tolerance, and your approach to money management.
How to trade downtrends using TLS and support/resistance on Binomo
First entry point: When the trend starts to reverse
In the chart below, you can see that there’s a support line for the uptrend that also serves as the resistance for the downtrend that has developed after the trend reversed. While the initial downtrend was ranging for a moment, it eventually turned into a clear downtrend. You should always wait for pin bars to develop fully before entering a position. In this case, the bearish candle encircled in green would be a good point to enter a sell position.
Aside from the bearish candle, you can also use the trend line – support intersection as a signal for entering a new position. Based on the above table, you can see that the clear downtrend started right at the point where the two lines intersected.
Second entry point: When markets range before the price breaks resistance
In this example, you can see that although the chart seems to experiencing a downtrend, the lows of the uptrend and the lows of the downtrend are roughly in the same level. The green circle shows a possible breakout point, near the area where the blue line intersects with the red line. The bearish candle developing in this area is a good sign that the downtrend will be continuing further.
Take note that you should probably enter a short sell position if this happens
Why is that?
Well, the downtrend is still in its early stages, which means that the trend could easily reverse any time. Take a look at the continuation of the chart from above. You can see that the trend has now completely reversed. Even the line, which was supposed to be the resistance line for the left side of the chart, has now become the support line for the right side.
Third entry point: When prices rise to resistance then falls
Sometimes when riding a downtrend, prices may rise above the resistance line before falling again. As you can see encircled in green below, the prices raised briefly before continuing the downtrend. In this case, it’s best to wait and see if the price can rise above your trend line. A solid bearish candle will alert you if sellers are starting to take over the markets, which makes it a good entry point.
Work with a trend for successful trades
Honestly, very few things are truer than the saying “The trend is your friend”. When it comes to trading, knowing how to work with a trend is really your best bet if you want to consistently profit from trades.
The best thing about this is that trends are extremely easy to identify even if you’re a complete beginner. Just by looking at your trading chart, you can usually already identify a trend or two. If you want to go the extra mile, you can also confirm the trend first by drawing a trend line.
Another thing to remember is that trends don’t stay the same way forever. Trend reversals happen all the time and you need to be quick enough to determine when they’re going to happen. Luckily for you, there are signs most of the time. You just have to familiarize yourself with the different indicators so that you’ll know what the best trade entry points are during a trend reversal.
How to manage emotions when trading using TLS on the Binomo platform
One of the most important things that you need to remember as a trader is that you should always keep your emotions in check. Whatever happens during your trades, always keep a level head and never let your emotions get the best of you. No matter how good you are at implementing strategies, if you’re an emotional trader, you’re bound to end up more losses than profits.
For instance, if you’re following an uptrend, you should prepare yourself for any possible trend reversals as well as trend continuations. Expect a downtrend to happen at any time. Even if it doesn’t, don’t be too greedy and certainly don’t expect the uptrend to last forever.
Another mistake you could make is trading against the trend. The TLS method works for a very good reason: because trends hardly ever lie. If you try going against the trend, you’ll lose money for a great probability. Before trading, make sure there are clear signals first.
Also, your trade entry points should ideally always be touching the trend line. Trade entry points that don’t touch the trend line can easily lead to losing positions, as you can see in the chart below. Imagine if you sold in the areas encircled and red and if you bought in the areas encircled in green? You would’ve lost a lot of money.
If you only use your emotions and don’t follow the Trend Level Signals method despite the clear indicators, you could land losing trades one after the other. That’s why you should always make sure that you’re prepared before taking on any trades. Come up with a sound plan and stick to it, as long as you can see developments. If it doesn’t seem to work, stop trading for a while and get lots of practice first using your demo account.
That was a long read, but if you’ve come this far, then congratulations on learning more about trading using the Trend Level Signals method!
I hope I helped you learn how to identify a trend, check the RSI indicator to identify trend reversals, and use support and resistance levels to determine the best trade entry points. Hopefully, you also learned some tips and tricks on money management and on how you can control your emotions better when trading.
If you want a risk-free way to practice the TLS method now, be sure to sign up now for a free demo account on Binomo!
Good luck on your trading journey!