Zen Trading Tech

Intro

• Trendline breaks are often are followed by a test of the H or L and then a reversal.
• Many traders will lose money on that failed breakout
• So this drill is to help reduce those losses

Video

• I made a video on this here:

1. Intro
2. Video
3. Drill 1: Trendlines – Break- Test or not?
4. Drill 2: Trendline Break, New High, Reversal
5. Drill 3: Trendline Break on the Open
6. Drill 4: Moving Average Break
7. Conclusion

Drill 1: Trendlines – Break- Test or not?

Instructions

• Bear trendline is ABOVE
• Bull trendline is BELOW
• You can draw the whole move – but you often have to re-draw them.
• This is because the line from the initial spike will be different if you connect the trendline from the first pullback
• See examples below
• It works better if you take it from the 1st pullback
• Did we test it or not after?

Drill 2: Trendline Break, New High, Reversal

Instructions

• This traps traders into a fake breakout
• These appear as higher-higher double tops and lower-low double bottoms
• It is very common on the open
• When channel is too tight:
  • Avoid Trading Countertrend When No Trendline Break
  • Stay In Swing When No Trendline Break
• Test does not have to get to new high or low – reversal strong

Drill 3: Trendline Break on the Open

Instructions

• Go and review 20 opens with gaps and see how common this pattern appears
• Sometimes the break was YD close, other times it is a new break on the open
• How could you use it in your trading?

Drill 4: Moving Average Break

Instructions

• Here a break / cross of the moving average which doesn’t come back – often comes back later.
• Sometimes the next day on the open

Conclusion

• This is a really great drill to avoid losses taken at the end of a move and position yourself flat ready to trade the new direction