Trade Stock Indices

Learn Stock Indices Trading

Indices Trend Line Break

After stock indexes price has moved in a certain direction for an extended period of time within a channel it reaches a point where it stops moving within the channel. When this happens we say that the indices trend line has been broken.


Since the line is the point of support or resistance then we expect the stock indexes trading market to move towards the opposite direction. When this happens traders will close the stock indices orders which they had bought or sold. This is called taking profit.


Up indices trend Reversal

When stock indexes price breaks upward line (support) the stock indexes trading market will then move down

Indices Trend break and indices trend Reversal


This signal is considered to be complete with the formation of a lower high or a lower low. This also provides a trading opportunity to go short once it is broken.



Down indices trend Reversal

When stock indexes price breaks downward line (resistance) the stock indexes trading market will then move up

Down indices trend indices trend Reversal

Downwards Channel break


This signal is considered to be complete with the formation of a higher low or higher high. This also provides a trading opportunity to go long once it is broken.


NB: Sometimes when stock indexes price breaks its indices trend it might first of all consolidate before moving in the opposite direction. Either way it is always good to take profit when the stock indexes trading market direction reverses.


To trade this stock indexes trading setup as a indices trader once you open a new trade in the direction of the indices trend reversal the stock indexes price should immediately move in that direction, in a indices price breakout manner. This means that the stock indexes trading market should immediately move in that direction without much of a resistance.


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If on the other hand the stock indexes trading market does not immediately move in the direction of the stock indexes price breakout then it is best to close out the trade because it means that the indices trend is still holding.


Another tip is to wait for the indices trend line to be broken and for the stock indexes trading market to close above or below it so as to confirm this indices signal.


What happens is that most traders open trades waiting for a reversal even before the indices trend is broken, only for the stock indexes price to touch this line and for the current market direction to hold and indices to continue with the current market direction.


Therefore, when trading this stock indexes trading setup it is best to wait until the breakout has been confirmed by stock indexes price closing above or below the indices trend line, depending on the direction of the stock indexes trading market.



  • Upward Market Direction Reversal - this stock indices signal is confirmed once the stock indexes trading market closes below this upward line, this should be the correct time to open a sell short trade, so as to avoid a indices trading whipsaw.


  • Downward Market Direction Reversal - this stock indices signal is confirmed once the stock indexes trading market closes above the downward line, this should be the correct time to open a buy long trade, so as to avoid a indices trading whipsaw.


Combining With Double Tops or Double Bottoms Indices Trading Chart Patterns

A good trade setup to combine this stock indexes trading setup with is the double tops and double bottoms stock indexes chart patterns. Read Double Tops and Double Bottoms Chart patterns Tutorial.


This setup should already have formed before the indices trend break signal. Because these double tops and double bottoms are also reversal stock indexes trading signals, then combining these two setups will give the indices trader a good probability of avoiding a indices trading whipsaw.


In the above chart screenshots these indices trading setups can be confirmed to have formed even before the reversal stock indices signal appeared.


First Example of Upward Direction Reversal - the Double tops chartpattern had already formed before the indices trend break signal appeared on the stock indexes trading chart.


Second Example of Downward Direction Reversal - the Double bottoms stock indexes chart pattern had already formed before the indices trend break signal appeared on the stock indexes trading chart.


Double Tops Double Bottoms Combined With Indices Trend Line Breaks Reversal

Double Tops or Double Bottoms Combined With other Reversal Indices Trading Signals

 

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