You are used to technical indicators in your trading in Expert Option, which is okay.

But have you stopped for a moment to consider the bliss which is in the drawing tools you have been ignoring on the Expert Option trading platform?

I thought you should explore the drawing tools availed by the broker.

Therefore, in this post, I am going to show you exactly how to use some of the drawing tools to win in Expert Option.

The most prominent of them – trend lines, support, and resistance lines, are the ones we are going to focus on here.

Let us begin by exploring trend lines and discuss how you can use them to win in Expert Option.

We shall then proceed to explore support and resistance lines and establish how you can use them to win in Expert Option as well.

Ready?

Let us get at it.

A. Trend Lines.

A trend line is a drawing tool used to draw significant price levels horizontally and diagonally on the price chart.

It is a technical analysis tool useful to traders who are fond of drawing.

There is no specific drawing tool in Expert Option labeled as “Trend Line” though.

To draw trend lines, you can utilize the available lines on the Expert Option trading platforms such as the Ray and the Horizontal lines.

Trend lines are simply lines on the price chart which are drawn to join specific points along the price of an asset, showing the general trend of the market.

 

Spotting Pivot Points.

The first step in using trend lines involves picking pivot points on the price to anchor the trend lines. For a trend line to be one, it has to pass through a minimum of three pivot points.

Therefore, identify at least three, or even more points on the price chart, through which the trend line will pass.

The pivot points you identify must be all lows or all highs.

You cannot join highs and lows together in any meaningful trend line trading unless you are creating a zigzag indicator, which is not the case here.

Drawing Trend Lines.

The next step involves the actual drawing of trend lines.

Click on the button labeled “Drawings”, choose the Ray drawing tool and apply it to the price chart.

You can then adjust it to fit on at least three pivot points of the price which you had previously identified.

Remember they may either be at least three highs or at least three lows that are prominent.

You can always repeat the previous steps and this step to draw as many trend lines on the price chart as you wish, depending on how many your analysis requires.

Trend Lines Forming Channels.

Trend lines actually form the basis of channels, for they are the very tools used to draw channels of the price on the price chart or channels of the price representation on an oscillator window.

The trend lines forming channels occur in such a way that after joining the highs with one trend line and the lows with another, the two lines appear almost parallel.

Trend lines are used to connect swing highs and swing lows of the price on the price chart to get channels.

Channels, in turn, give the general direction of the price and aid in making trading decisions.

1. Upward Channel.

If using trend lines, you join swing highs and swing lows of the price and get an upwardly slopping channel, then the general price direction is upward.

In this scenario, the most important trend line is the one joining the swing lows.

The price or its representation is meant to always obey such trend line and if it breaks it downwards, then that uptrend has weakened and may reverse downwards shortly.

2. Downward Channel.

On the other hand, if using trend lines, you join swing highs and swing lows of the price and get a downwardly slopping channel, then the general price direction is downward.

In this scenario, the most important trend line is the one joining the swing highs.

The price is meant to always obey such a trend line and if it breaks it upwards, then that downtrend has weakened and may reverse upwards soon.

3. Horizontal Channel.

There is also a possibility of joining swing highs and swing lows with trend lines to get a horizontal channel. In such a situation, both the upper and lower trend lines are important.

The price is meant to reverse downwards at the upper trend line and upwards at the lower trend line.

Breaking any of those lines nullifies the price range and a huge price move may follow thereafter, in the direction of the breakout.

Trend Lines Occurring Singly.

It is not cast on a stone that trend lines must be in pairs forming price channels.

The basic formulation is actually using a single trend line.

You can have trend lines that occur singly without a corresponding line, giving the general impression of the trend of the market.

They also work perfectly well, just as those trend lines forming price channels would.

That said, do not kill yourself trying to find a complementary trend line to the one you already have to form a channel.

If no trend line fits to complement the one you already have run with the single trend line which defines the general market trend well.

As you resort to a single trend line, however, take note of this.

A single trend line showing a general uptrend should do so by slopping upwards after joining the major lows of the price.

On the other hand, a single trend line showing a general downtrend should do so by sloping downwards after joining the major highs.

Single Trend Line Analysis.

We have already established that trend lines can be drawn to join purely lows or purely highs of the price.

That means for this case, only one trend line will be used and not a channel of two or more trend lines.

If the trend line joins lows of the price and slopes upwards, then the general trend of the market is upwards.

You can consider it a bullish signal if the price respects the line with a retest, failing to break it downwards.

However, it is a bearish signal when the price breaks below that trend line and retests in that direction, confirming the downward breakout.

If the trend line joins highs of the price and slopes downwards, then the general trend of the market is downwards.

You can consider it a bearish signal if the price respects the line with a retest, failing to break it upwards.

However, it is a bullish signal when the price breaks above that trend line and retests in that direction, confirming the upward breakout.

 

Channel Analysis.

Trend lines may also form a channel, where pivot points were identified for both highs and lows.

If you draw one trend line joining at least three highs and another at least three lows and they form a perfect channel, then you can use them as support or resistance levels.

That is regardless of whether the channels slope upwards, downwards, or are horizontal.

A perfect channel is to means that the lines are almost parallel to each other after one joins the highs and the other the lows.

1. Horizontal Channel Analysis.

It is a bullish signal when the price falls to and retests the lower trend line without breaking it downwards.

However, it is a bearish signal when the price rises to and retests the upper trend line without breaking it upwards.

Alternatively, it is a bullish signal when the price breaks above the upper trend line and retests in that direction confirming the upward breakout.

In contrast, it is a bearish signal when the price breaks below the lower trend line and retests in that direction, confirming the downward breakout.

2. Upward Channel Analysis.

If using trend lines, you join swing highs and swing lows of the price and get an upwardly slopping channel, then the general price direction is upward.

In this scenario, the most important trend line is the one joining the swing lows.

The price or its representation is meant to always obey such trend line and if it breaks it downwards, then that uptrend has weakened and may reverse downwards shortly.

Consider it a bullish signal if the price falls to the lower trend line joining the lows and respects the line with a retest, failing to break it downwards.

However, it is a bearish signal when the price breaks below that lower trend line and retests in that direction, confirming the downward breakout.

Ignore any hints coming from the upper trend line if the channel is upward and use the lower trend line joining the lows as we have discussed.

3. Downward Channel Analysis.

If using trend lines, you join swing highs and swing lows of the price and get a downwardly slopping channel, then the general price direction is downward.

In this scenario, the most important trend line is the one joining the swing highs.

The price is meant to always obey such a trend line and if it breaks it upwards, then that downtrend has weakened and may reverse upwards soon.

Consider it a bearish signal if the price rises to the upper trend line joining the highs and respects the line with a retest, failing to break it upwards.

However, it is a bullish signal when the price breaks above that upper trend line and retests in that direction, confirming the upward breakout.

Ignore any hints coming from the lower trend line if the channel is downward and use the upper trend line joining the highs as we have discussed.

Confirming Signals before Entry.

Did I at any point above mention that you should buy or sell after you have a bullish or bearish signal coming from the trend line analysis?

No, I didn’t, because trend line analysis alone is not a guarantee to winning in Expert Option.

You need to confirm your bullish or bearish signal which you obtain from trend line analysis using another concept.

The best concept to confirm trend line analysis signals so far is the use of candlestick patterns.

So what are candlestick patterns and how can you use them together with trend lines to win in Expert Option?

Let us find out.

Candlesticks.

We need to first establish what candlesticks are because it is candlesticks that form candlestick patterns.

A candlestick is a representation of an asset’s price during a given period.

You can choose the desired timeframe within which a candlestick will form.

After the end of that specified period, another candlestick will begin to form, and so on.

There are basically two candlestick types – bullish candlesticks and bearish candlesticks.

In a bullish candlestick, the closing price is higher than the opening price. In a bearish candlestick, however, the closing price is lower than the opening price.

Bullish candlesticks are usually of a different color from bearish candlesticks, say white for bullish and blue for bearish as is the case with the Expert Option platform.

Parts of a Candlestick.

A candlestick has two parts – a body and two tails or shadows.

Note that the tails may not always be present in a candlestick.

Sometimes a candlestick will have two tails, one tail, or no tail at all.

The body represents the opening and closing prices.

The ends of the two tails represent the highest and lowest prices within the period of the candlestick formation.

 

Here are the specifications;

• Bullish candlestick (White) – The lower end of the body represents the opening price while the upper end the closing price. The end of the upper tail represents the highest price while that of the lower tail represents the lowest price.
• Bearish candlestick (Blue) – The upper end of the body represents the opening price while the lower end the closing price. The end of the upper tail represents the highest price while that of the lower tail represents the lowest price.

Having said that, there are 3 basic features of a candlestick.

• The body – represents the opening and closing prices.
• The tails – show the highest and lowest prices during the specific period.
• The color – shows the direction of the price movement. A white body shows a rising price while a blue body shows a falling price.

Candlestick Patterns.

A candlestick pattern is a specific orientation of a single or a set of candlesticks.

Candlesticks form specific patterns which traders can recognize and utilize for profitable trading.

Some candlestick patterns will have bullish connotations as others signify bearish price moves.

Other candlestick patterns will show market indecision and so warn traders from entering the markets.

Here are some of the most significant candlestick patterns with bullish connotations:

• Bullish engulfing – formed by a short bearish candlestick completely engulfed by a larger bullish candlestick. The bullish candlestick must gap down to open below the close of the bearish candlestick, then close above the open of the same candlestick.
• Hammer – formed by one candlestick with a short body and a long lower tail. The tail must be more than twice the height of the body.
• Inverse hammer – formed by one candlestick with a short body, a long upper tail and very short or no lower tail.
• Three white soldiers – formed by three consecutive bullish candlesticks with small wicks. From the second, each candlestick must open and close higher than the previous.
• Piercing line – formed by a long bearish candlestick followed by a long bullish candlestick. The bullish candlestick must gap down to open below the close of the bearish candlestick, then close at or above the middle of the body of the bearish candlestick.
• Morning star – formed by a long bearish candlestick followed by a gap down then a short-bodied candlestick or a doji, a gap up then and a long bullish candlestick.

On the other hand, here are some of the most significant candlestick patterns with bearish connotations:

• Bearish engulfing – formed by a short bullish candlestick completely engulfed by a larger bearish candlestick. The bearish candlestick must gap up to open above the close of the bullish candlestick, then close below the open of the same candlestick.
• Hanging man – formed by one candlestick with a short body and a long lower tail. The tail must be more than twice the height of the body. Its difference with the hammer is that it occurs near the end of an uptrend.
• Shooting star – formed by one candlestick with a short body, a long upper tail, and very short or no lower tail. Its difference with the inverse hammer is the uptrend.
• Three black crows – formed by three consecutive bearish candlesticks with small wicks. From the second, each candlestick must open and close lower than the previous.
• Dark cloud cover – formed by a long bullish candlestick followed by a long bearish candlestick. The bearish candlestick must gap up to open above the close of the bullish candlestick, then close at or below the middle of the body of the bullish candlestick.
• Evening star – formed by a long bullish candlestick followed by a gap up then a short-bodied candlestick or a doji, a gap down then and a long bearish candlestick.

How to Trade Trend Lines with Candlestick pattern Confirmation.

Now that you understand what candlestick patterns and trend lines are, how about we now get to understand how the two can be combined together in a perfect trading strategy?

The next part of this post focuses on how to trade trend lines with confirmations from candlestick patterns.

Spotting the Trend Line Signals.

Do you remember the various bullish and bearish signals we discussed in the trend line analysis?

It is such signals which you confirm using bullish and bearish candlestick patterns before you can enter any trade.

1. Single Trend Line Signals.

If the trend line joins lows of the price and slopes upwards, then the general trend of the market is upwards.

You can consider it a bullish signal if the price respects the line with a retest, failing to break it downwards.

However, it is a bearish signal when the price breaks below that trend line and retests in that direction, confirming the downward breakout.

If the trend line joins highs of the price and slopes downwards, then the general trend of the market is downwards.

You can consider it a bearish signal if the price respects the line with a retest, failing to break it upwards.

However, it is a bullish signal when the price breaks above that trend line and retests in that direction, confirming the upward breakout.

2. Horizontal Channel Signals.

It is a bullish signal when the price falls to and retests the lower trend line without breaking it downwards.

However, it is a bearish signal when the price rises to and retests the upper trend line without breaking it upwards.

Alternatively, it is a bullish signal when the price breaks above the upper trend line and retests in that direction confirming the upward breakout.

In contrast, it is a bearish signal when the price breaks below the lower trend line and retests in that direction, confirming the downward breakout.

3. Upward Channel Signals.

Consider it a bullish signal if the price falls to the lower trend line joining the lows and respects the line with a retest, failing to break it downwards.

However, it is a bearish signal when the price breaks below that lower trend line and retests in that direction, confirming the downward breakout.

Ignore any hints coming from the upper trend line if the channel is upward and use the lower trend line joining the lows as we have discussed.

4. Downward Channel Signals.

Consider it a bearish signal if the price rises to the upper trend line joining the highs and respects the line with a retest, failing to break it upwards.

However, it is a bullish signal when the price breaks above that upper trend line and retests in that direction, confirming the upward breakout.

Ignore any hints coming from the lower trend line if the channel is downward and use the upper trend line joining the highs as we have discussed.

Candlestick Pattern Confirmation.

It is in this step where the rubber meets the rod. It is here where the application of both trend lines and candlestick patterns finds significance.

So how do you blend candlestick patterns and trend lines to pick your entries?

It is very simple.

For every bullish signal, you obtained in the previous step, you must lookout for a bullish candlestick pattern as a buy entry trigger.

Likewise, for every bearish signal obtained in the previous step, a bearish candlestick pattern must accompany it as a sell entry trigger.

Look out for the following bullish candlestick patterns when a bullish signal comes up:

• Bullish engulfing.
• The Hammer.
• Inverse Hammer.
• Three White Soldiers.
• Piercing Line.
• Morning Star.

On the other hand, look out for the following bearish candlestick patterns when a bearish signal comes up:

• Bearish engulfing.
• Hanging Man.
• Shooting Star.
• Three Black Crows.
• Dark Cloud Cover.
• Evening Star.

Entering a Buy or Sell position.

At this point, you have already established a trend line analysis signal and a relevant candlestick pattern is accompanying it.

Once any bullish signal comes up and a bullish candlestick pattern supports it, enter a buy position.

On the flip side, once any bearish signal comes up and a bearish candlestick pattern supports it, enter a sell position.

B. Support and Resistance.

What do you think, is support and resistance?

Support and resistance are two different concepts with opposing meanings as far as trading is concerned.

Let us find out what each means and bring out the opposing meaning hinted at.

Support is a market price level that indicates a strong buy pressure. It hints at a surplus of buyers and so falling prices, almost always, seem to reverse upwards once they reach such price level or zone.

The major lows of the price seem to form almost a straight line, whether horizontal or diagonal.

Resistance, on the other hand, is a market price level that indicates strong selling pressure.

It points to a surplus of sellers and so rising prices, almost always, seem to reverse downwards once they reach such price level or zone.

The major highs of the price seem to form almost a straight line, whether horizontal or diagonal.

Realize that we cannot conclusively define support and resistance because almost everyone seems to have their own definition.

Support and resistance may not occur at a fixed level as we hinted at with our prior definition but moving support and resistance levels may also occur.

1. Horizontal Support and Resistance.

By horizontal support and resistance, it means that the orientation of the support and resistance levels across the price chart is horizontal.

Horizontal lines would best fit if drawn to join the highs of the price for resistance and the lows if the price for support.

Horizontal support is where the areas of strong buy pressure arrange in such a way that they are in a horizontal orientation.

The price seems to respect and not break below almost the same horizontal price level.

A horizontal line applied to that level of the price would touch almost all the price lows formed by the price once it hits that price level.

That is to means that the lows of the price are arranged in a horizontal line.

On the other hand, horizontal resistance is where areas of strong sell pressure arrange in such a way that they are in a horizontal orientation.

The price seems to respect and not break above almost the same horizontal price level.

A horizontal line applied to that level of the price would touch almost all the price highs formed by the price once it hits that price level.

That is to means that the highs of the price are arranged in a horizontal line.

2. Diagonal Support and Resistance.

Diagonal support and resistance are support and resistance levels that are not horizontal but diagonally run across the price chart.

These are plotted using trend lines. Do you remember how trend lines work?

Trend lines are drawn to connect the series of highs of the market and also the series of lows of the market.

At times, the line you get by connecting the highs of the market and the line you get by connecting the corresponding lows of the market will be horizontal.

At other times, such lines will be diagonal and that is where the concept of diagonal support and resistance is derived from.

Diagonal support is where the areas of strong buy pressure arrange in such a way that they are in a diagonal orientation.

The price seems to respect and not break below progressively higher and higher price levels.

A line applied to join the progressively higher price levels would be sloping upwards.

That is to means that the lows of the price are arranged in a diagonal upward sloping line.

Ignore diagonal support forming at progressively lower and lower price levels, hence a downward sloping trend line.

Diagonal resistance is where the areas of strong sell pressure arrange in such a way that they are in a diagonal orientation.

The price seems to respect and not break below progressively lower and lower price levels.

A line applied to join the progressively lower price levels would be sloping downwards.

That is to means that the highs of the price are arranged in a diagonal downward sloping line.

Ignore diagonal resistance forming at progressively higher and higher price levels, hence an upward sloping trend line.

3. Moving Support and Resistance.

So what are moving support and resistance levels?

Moving support and resistance are areas of strong buy pressure and strong sell pressure alternating as the price moves in a particular direction.

If the price has been rising and then retraces downwards, the highest point it hit before retracing downwards becomes a resistance.

Once the downward retracement is over and the price rises again, the lowest level the price hit while retracing downwards becomes support.

A series of resistance and support levels continues as long as the price keeps rising, occasionally retracing downwards then rising again on the uptrend.

If the price has been falling and then retraces upwards, the lowest point it hit before retracing upwards becomes support.

Once the upward retracement is over and the price falls again, the highest level the price hit while retracing upwards becomes resistance.

A series of support and resistance levels continue as long as the price keeps falling, occasionally retracing upwards then falling again on the downtrend.

Plotting Support and Resistance.

Before you can trade support and resistance, you must first draw such levels using either horizontal lines or trend lines (Ray).

So what dynamics do exist in the drawing of support and resistance levels in Expert Option?

Let us find out.

The best kind of chart to use while drawing or plotting support and resistance in Expert Option is the line or area chart.

That particular kind of chart uses closing prices to plot the line as opposed to the Japanese candlestick chart which brings in the open, highest and lowest prices in addition to the closing price.

Support and resistance are best drawn using closing prices and that tells why the line chart is the best.

First of all, generally observe the market to see which horizontal and diagonal support and resistance would be ideal.

If the highs or lows seem to be aligned in a horizontal fashion, then horizontal resistance or support would do.

However, if the highs or lows seem to take a diagonal alignment, then you know that diagonal resistance or support will be best.

Once you have all that settled, draw your support or resistance level and you are ready to trade.

Note that not always will support be accompanied by resistance and vice versa.

At times you can just locate one of the zones, either support or resistance and that is still okay.

It will work just as well as it would have worked if it had the corresponding zone accompanying it.

How to tell Whether Support or Resistance is being Obeyed or Broken?

Most traders think that if the price closes above resistance, then the resistance has been broken.

They also argue that if the price closes below support, then the support has been broken.

But is that entirely true?

Truth is, we have seen markets that have closed below support still gain ground to reverse back upwards and continue up.

We have also seen markets that have closed above resistance still weaken and reverse back downwards and continue down.

So is the claim that closing beyond a level means breaking that level true?

The best thing to do is to take support and resistance as zones and not absolute levels or numbers.

That will give an allowance to observe the price within a range of price levels before you can resort to a bounce-back or a level break.

What we are advocating for is caution when handling matters support and resistance breaks because some of these breaks are just the price testing that level and then obeying it eventually.

1. Candlestick Proof for Obedience/Break of Support or Resistance.

In Japanese candlestick charts, the testing or respect of support will be shown by candlesticks with long lower wicks.

However, the testing or obedience to resistance will be shown by candlesticks with long upper wicks.

Observing such candlesticks may be a sure sign that the level is not actually being broken but being obeyed. The vice versa is also true.

Candlesticks that do not form long lower wicks at support may mean that the level is about to be broken.

On the other hand, candlesticks that do not form long upper wicks at resistance may mean that the level is about to be broken.

2. Price Action Proof for Obedience/Break of Support or Resistance.

There is also another factor worth considering in determining whether the price is about to obey or break the support or resistance.

It is based on pure price action.

Observe the price action and if the market forms progressively higher lows as it approaches the resistance, this is indicative that it will most likely break the resistance level.

On the other hand, if price action shows the market making progressively lower highs as it approaches the support, this may hint at the price most likely breaking the support level.

So what on price action will show that the support or resistance is not about to be broken?

If the price makes irregular and not progressively higher lows as it approaches the resistance, breaking such a level may not be easy.

On the other hand, if the price makes irregular and not progressively lower highs as it approaches the support, breaking the level may be a task.

Support and Resistance Signals.

Obtaining support and resistance trading signals is not difficult.

There are two outcomes as concerns support and resistance.

Either the price will bounce after hitting the level or the price will continue in that direction, breaking the level.

We have already mentioned and discussed that in detail in the previous section.

Signals from the Price Bounce:

• Consider it a bullish signal when the price falls to and bounces up from support. In Japanese candlestick charts, the testing of support will be shown by candlesticks with long lower wicks.
• Consider it a bearish signal when the price rises and bounces down from resistance. In Japanese candlestick charts, the testing of resistance will be shown by candlesticks with long upper wicks.

Signals from the Price Break:

• Consider it a bullish signal when the price rises and breaks through resistance upwards. While rallying towards the resistance, the price should have been forming progressively higher lows. Additionally, candlesticks must not be showing long upper wicks.
• Consider it a bearish signal when the price falls and breaks through support downwards. While rallying towards the support, the price should have been forming progressively lower highs. Additionally, candlesticks must not be showing long lower wicks.

Signal Confirmation before Entry.

Support and resistance analysis alone is not a guarantee to winning in Expert Option.

You need to confirm your bullish or bearish signal which you obtain from support and resistance analysis using another concept.

The best concept to confirm support and resistance analysis signals so far is the use of candlestick patterns.

This is just as is the case with trend lines.

We already discussed what candlestick patterns are under trend lines.

You should use the bullish candlestick patterns to confirm a bullish signal from your support and resistance analysis.

On the flip side, use the bearish candlestick patterns to confirm a bearish signal from your support and resistance analysis.

Look out for the following bullish candlestick patterns when a bullish signal comes up:

• Bullish engulfing.
• The Hammer.
• Inverse Hammer.
• Three White Soldiers.
• Piercing Line.
• Morning Star.

On the other hand, look out for the following bearish candlestick patterns when a bearish signal comes up:

• Bearish engulfing.
• Hanging Man.
• Shooting Star.
• Three Black Crows.
• Dark Cloud Cover.
• Evening Star.

Entering a Buy or Sell position.

At this point, you have already established a support/resistance analysis signal and a relevant candlestick pattern is accompanying it.

Once any bullish signal comes up and a bullish candlestick pattern supports it, enter a buy position.

On the flip side, once any bearish signal comes up and a bearish candlestick pattern supports it, sell.

Final Thoughts on How to Use Trend, Support, and Resistance Lines to Win in Expert Option.

This post might just have been the ultimate guide on the dynamics of trend lines, support, and resistance while trading.

The various concepts factor in price action as well as the drawing tools we have discussed above. The result is some perfect and fruitful trading strategies.

Go ahead and make the most out of the drawing tools on the Expert Option trading platform you are using.

That is by employing the trend line, support, and resistance trading skills that this guide has taught you.

Happy Trading!