Rising Trend Line Forex Reversal Strategy

Price action in the forex market forms trend lines and is kept in check by trend lines. It is a well-known fact that as one trend line is breached, another one takes shape and the cycle is sustained.

The Rising Trend Line forex reversal strategy is designed around trend lines to offer currency traders valid trading opportunities, either long or short.

Chart Setup

MetaTrader4 Indicators: RAVI.ex4 (default setting), Trend Line.ex4

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day

Recommended Trading Sessions: Any

Currency Pairs: Any pair

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Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Initiate a buy entry if the following indicator or chart pattern gets displayed:

  1. If price breakout above the trend line after testing its resistance level severally (it should be tested at least 3 times for it to be a valid trend line), price is said to be pressured to the upside i.e. a trigger to go long on the pair of interest.
  2. If the grey and green histograms of the RAVI custom indicator aligns above the 0.00 signal level as seen on Fig. 1.0, it is an indication of bullish momentum i.e. a signal to enter buy on your position(s).

Stop Loss for Buy Entry: Place stop loss 2 pips below trading support.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following rules or conditions are intact:

  1. If after a confirmed breakout from a trend line, price is seen to fall back below the trend line, then it is okay to say that such a breakout has failed, hence an exit or take profit is highly recommended.
  2. If the histograms of the RAVI custom indicator readjust to form below the 0.00 signal level as seen on Fig. 1.0, it is a signal of weaning bulls pressure, hence an invitation to exit or take profit without delay.

Sell Entry Rules

Enter a sell order if the following holds true:

  1. If price breakout below the trend line after testing its support level severally (it should be tested at least 3 times for it to be a valid trend line), price is said to be pushed lower i.e. a trigger to sell the currency pair of focus.
  2. If the grey and red histograms of the RAVI custom indicator aligns below the 0.00 signal level as seen on Fig. 1.1, the sentiment in the market is said to be bearish i.e. a sell alert.

Stop Loss for Sell Entry: Place stop loss 2 pips above trading resistance.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following chart or indicator pattern are on display:

  1. If after a confirmed breakout from a trend line, price is seen to jump above the trend line during a bearish trend, we can conclude that such a breakout has failed, hence an exit or take profit is highly recommended.
  2. If the histograms of the RAVI custom indicator readjust to align above the 0.00 signal level as seen on Fig. 1.1, it is a signal of weaning bears power, hence a call to exit or take profit straight away.

Sell Trade Example

Fig. 1.1

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About The Trading Indicators

The Range Action Verification Index (RAVI) custom indicator for MT4 was designed by Tushar Chande in the late 1990s, in a bid to determine the strength of a trend.

The RAVI indicator computes the percentage difference between the most recent prices and older prices.

A trend line is a negative or positive slope that is formed by connecting two or more high or low points respectively.

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