Using Trend Lines, Channels, and Triangles to Trade Breakouts

The wonderful thing about breakout trading in forex is that possibilities are relatively easy to notice with the naked eye, just like breakouts on your face!

You don't even have to glance in the mirror, unlike the former!

You'll be able to detect strong prospective deals rather fast once you get used to the indicators of breakouts.

Patterns in Charts

You should be used to looking at charts and recognizing common chart patterns that signal a reversal breakthrough by now.

Here are a few examples:

• Bottom/Top/Bottom/Bottom/Bottom/Bottom

• Shoulders and Head

• Top/bottom/top/bottom/top/bottom/top/bottom/top/bottom

Check out our chart patterns tutorial for more details.

You can use a variety of tools and indicators to support your argument for a reversal breakout in addition to chart patterns.

Lines of Trend

Drawing trend lines on a chart is the first step in spotting a likely breakout.

To make a trend line, all you have to do is look at a chart and draw a line that follows the current trend.

It's great if you can connect at least two tops or bottoms together while designing trend lines. The trend line becomes stronger as additional tops or bottoms connect.

So, how can you make the most of trend lines？ Only two things can happen as the price reaches your trend line.

• The price may bounce off the trend line and continue in the same direction.

• A reversal could occur if the price breaks through the trend line.

We'd like to take advantage of that opportunity!

However, just looking at the price isn't enough. Using one or more of the markers given previously in this session could be quite beneficial in this situation.

The MACD was exhibiting bearish momentum as the EUR/USD violated the trend line.

Using this data, we can confidently predict that the breakout will continue to push the euro lower, and that we should short this pair as traders.

Channels

Drawing trend channels is another approach to discover breakout opportunities.

Drawing trend channels is nearly identical to drawing trend lines, with the exception that after drawing one side of a trend line, you must add the other side.

Breakouts in either direction of the trend can be detected using channels.

We wait for the price to reach one of the channel lines and then look at the indicators to help us make our decision, same to how we approach trend lines.

As EUR/USD dropped below the lower line of the trend channel, the MACD showed strong bearish momentum. It would have been a fantastic sign to go short at this point!

Triangles

Looking for triangles is the third approach to find breakthrough opportunities.

Triangles form when the market price begins to consolidate into a tight range after being turbulent at first.

When the market consolidates, our goal is to position ourselves so that we may profit when a breakout happens.

Triangles are divided into three types:

• Triangle that is ascending

• Triangle descending

• Triangle with symmetry

Ascending Triangles

When there is a resistance level and the market price continues to create higher lows, ascending triangles form.

This is a hint that the bulls are gradually gaining ground on the bears.

An ascending triangle's story goes like this: if the price reaches a certain high, multiple traders are encouraged to sell at that level, causing the price to plummet back down.

On the other hand, some traders feel the price should be greater, and that when the price begins to fall, they should buy higher than the previous low.

As a result, a battle between bulls and bears ensues, culminating in an all-out fight...

Ascending triangles are normally positive signs, therefore we're hoping for a breakthrough to the higher. The correct approach would be to go long when we witness a breach of the resistance level.

Triangles that descend

The opposite of rising triangles are descending triangles.

As a result of the sellers' continued pressure on purchasers, we're starting to see lower highs met with a firm support level.

In general, descending triangles are bearish signs.

Our goal is to take advantage of this by positioning ourselves to go short if the price breaks below the support line.

Triangles that are symmetrical

The symmetrical triangle is the third sort of triangle.

Rather of a horizontal support or resistance level, the bulls and bears create higher lows and lower highs, with an apex in the center.

Asymmetrical triangles, unlike ascending and descending triangles, which are often bullish and bearish signs, have no directional bias.

You must be prepared to trade either side of a breakout!

When it comes to the symmetrical triangle, you want to be prepared for both an upside and a downward breakout.

This is an excellent opportunity to use the one-cancels-the-other (OCO) order! Do you have any idea what an OCO order is？ Review your order types now!

In this case, the GBP/USD pair broke out to the upside, triggering our long entry.

The Triangle Breakouts are being dismantled.

Consider facial breakouts to help you remember the different forms of triangle breakouts.

Triangles that are ascending frequently break out to the upside. Think of bursting out on your forehead when you think of ascending triangles.

Triangles that are descending frequently break out to the downside. Think of breaking out on your chin when you think of falling triangles.

Symmetrical triangles can break in two directions: upwards or below.

Consider breaking out on both your chin and forehead when you think of symmetrical triangles.

“Why are you staring at my pimples so much？”

Here's a short and gross memory jogger:

Forehead breakout = ascending triangle

Chin breakout = Descending triangle

Forehead OR chin breakout = symmetrical triangle