Professional traders give often advice to trade with the trend. This will improve your chances for profitable transactions. But you have a few steps to take. The first thing is to recognise the trend. Next, you must know when exactly open a position. Experienced traders do not have big problems with that. But at the beginning of the trading journey, it may be somewhat difficult.
Do not get discouraged. Binomo offers many tools that will help you in finding the best entry points for your trades. One of the methods you can apply is using the trendline together with the support and resistance levels. And today’s article is just about that.
How to prepare the Binomo chart
Drawing a trendline
A trendline shows the direction and strength of the trend. The steeper the line, the faster price moves.
There are a few possibilities to draw the trendline on your chart. But first, click on the indicator chart preferences icon on the left side of the platform. Then, choose the Tools tab. Now, you have several financial products. You can choose Line, Trendline, Ray, Segment or Horizontal. They are all drawing tools with which you can draw a line on the price chart.
To draw a trendline during the uptrend, you have to identify the lowest low and click it. Next, move the mouse and stretch the line to fit it to other lows. Then click again. The line is now attached to the chart.
When there is the downtrend, you have to connect peaks on your chart.
At any time you are able to remove any drawing tool attached to the chart. In order to do that, hover the pointer on the line you want to delete and right-click it.
Note, that it is enough to join two lows or highs. The line does not have to reach all lows and highs you see on the chart. Experiment with the period of the candles. Find out what period shows the trend best.
Take a look at the picture below. You will find the chart for the EURUSD currency pair. There is a trendline drawn during the uptrend.
Drawing the support and resistance lines on the Binomo price chart
You have attached a trendline to the chart. Now, you have to add support and resistance levels. They are the lines that seem to limit the price for some period of time. The price ranges between them.
The support and resistance are not constant. When the price finally breaks through them, new levels of the support and resistance are formed. Also, keep in mind that broken support often becomes a future resistance and vice-versa.
Trading with the combination of the trendline and the support/resistance
I will discuss the method on the example. There is a screenshot of the Binomo platform below. A strong uptrend has developed. A trendline is drawn.
Observe the first horizontal line. It formed the resistance in the preceding downtrend. Now it creates support for the uptrend.
A horizontal line in the middle represents resistance during the uptrend. The price bounces back from it a few times just to break out and move forward upwards.
When the price continues upwards, new resistance is formed. This is the third line.
When to open a trading position?
You should look for the moments when a candle forms at the intersection of the trendline and support/resistance. The first possibility to enter the trade happens when a pin bar appears at the middle resistance line and is crossed by the trendline. You ought to open a buy transaction at the beginning of the next candle.
The second opportunity appears when a bullish candle develops in the area of the trendline and the resistance line crossover. Open a buy trade at the beginning of the next candle.
With 5-minute period candles, you should keep the position open for a duration of at least 6 candles that is 30 minutes.
This is a simple method of using the trendline along with the support and resistance to find the best entry points. I encourage you to practice on the Binomo demo account. You get virtual cash there so you do not risk your money. Do you have any experience with trading with the trendline and support/resistance? Share your thoughts in the comments section below.
Best of luck!