Traders are always looking for ways to recognize market trends and direction. Many chart technicians use technical indicators to detect changing momentum, rising and falling trends and market volatility to determine price projections. A candle or bar chart is what is most often used to make trading decisions, however they seldom make it crystal clear when a stock has changed direction.
Three line break charts on the other hand usually help traders more accurately determine the current direction of the trend and alert them sooner when the trend has changed than do other methods (stochastics, moving average crossovers, etc). Three line break charts display a series of vertical boxes that are based on the closing prices. Every time there is a higher close a new green bar is created. When the price closes below the low of 3 green boxes the trend shifts to down and we start drawing red boxes. Every new closing low draws a new red box and so on. Three point break charts often can help a trader spot trend reversals quickly. There are many uses for 3 line break charts, you can use them for entries, exits, and make wonderful places to trail your stops to catch the majority of the move.
Three Line Break Charts
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