Everyone thinks that the trend line trading strategy is based on the higher time frame trading method. However, the pro traders always say that a trading strategy should never be limited by the time frame. If you know the proper way to draw the trend line, you can trade the critical levels both in the higher or lower time frame.
The lite UK traders in the investment industry often scalp the market by using the long term trend line. You might wonder why they are using a super complicated trading method. But in reality, they are using a simple strategy.
Learning trade the trend line in the lower time frame requires some special skills. Let’s find out the key steps that you must know to trade the trend line in the lower time frame.
Price action signals
The first thing you need to learn is the price action trading strategy. If you intend to scalp the trend line support or resistance level, you should have a clear idea about the price action confirmation signals. For instance, the highly-trained traders execute long trades at the bullish trend line support when they find a bullish price action signals. But if a switch to the lower time frame, you will notice that multiple bullish price action signals are present in the lower time frame.
So, if you trade those smaller time frame price action signals, you can easily scalp the market with a very tight stop. Some of the advanced traders often use trailing stops so that they don’t have to miss any good trade. At times, the market starts to move in favor of the trend just by testing the trend line. So, those who use trailing stops can easily ride the trend.
Learn to analyze multiple time frame data
Trading the trend line in the lower time frame requires an understanding of the multiple time frame. The elite traders in the options trading industry always use multiple time frame analysis to filter out the false signals. But analyzing the multiple time frame is a little bit confusing. The rookie traders often fail to give importance to the higher time frame data and mess up the trading process. Before you start trading the trend line, open a demo account.
Practice analyzing the same currency pairs in different time frames. Based on your analysis, try to predict the direction of the trend. Slowly you will learn to analyze multiple time frames with a high level of accuracy.
Analyze the news
The trend line trading strategy might the best trading system in the world but always be ready to accept the losing trades. However, you can reduce the number of losing trades by using the simple fundamental analysis. The elite traders at Saxo often use this method to find the key reversal in the market. Fundamental analysis is a little bit confusing since the market often exhibits false spikes on major news. But if you avoid the press conference and high impact news, you won’t have to deal with too much stress. At the initial stage, try to learn about the medium impact news. Once you get better at analyzing the medium impact news, start dealing with the high impact news.
Getting yourself educated in the fundamental analysis gives you a huge advantage in analyzing the lower time frame. When you start dealing with the trend line or resistance level, you can easily lower the risk factors by utilizing the news data. But all these things require hard work and experience.
Trade with a 1% risk
If you trade the trend line in the lower time frame, reduce the risk to 1%. Taking too much risk to earn more money is a very big mistake. Since you are dealing with the lower time frame, you should be careful about the risk factors. Unless you learn to deal with the risk exposure, you should stick to the traditional higher time frame trading method.