Contents
Line rebounding strategy
This is a pattern that tries to catch the moment in which the price is unable to move through the support/resistance, in which the price cannot break out of these levels.
It is believed among traders that the uptrend is over the moment the price touches the resistance level and the first candle closes beneath the line. They will open short positions then.
The same applies to the opposite situation when there is a downtrend on the market. When the price hits the support and the first candle closes above it, it is a signal to go long.
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Rebound line strategy in other cases
The line rebounding strategy validity does not end with horizontal lines like support and resistance. Just take a look at the picture below and you will notice, it also works with the diagonal lines which you can draw along the trend.
If you need further information about support/resistance, I encourage you to read the articles about combining trendline with support/resistance and about trading RSI with support/resistance.
Good luck!
Pros and Cons 😊😔
Let’s explore the advantages and disadvantages of the line rebounding strategy:
Advantages:
- ✅ Simple strategy that can be easily understood and applied.
- ✅ Provides clear entry and exit signals based on support/resistance levels.
- ✅ Works well in trending markets, both in uptrends and downtrends.
- ✅ Can be combined with other technical analysis tools for confirmation.
Disadvantages:
- ❌ False breakouts can occur, leading to potential losses.
- ❌ Requires accurate identification of support/resistance levels.
- ❌ Not suitable for all market conditions, such as range-bound markets.
- ❌ Relies on historical price data and may not guarantee future performance.
Q&A
- Q: What is the line rebounding strategy?
- Q: Does the line rebounding strategy work with diagonal trendlines?
- Q: Are there any recommended resources to learn more about combining trendlines with support/resistance?
- Q: Can the line rebounding strategy be used in conjunction with other technical analysis tools?
- Q: Is the line rebounding strategy suitable for all market conditions?
The line rebounding strategy aims to identify moments when the price fails to break through support or resistance levels. Traders use this pattern to anticipate reversals and open positions accordingly.
Yes, the line rebounding strategy can be applied to diagonal trendlines as well. It recognizes the significance of price reactions at various angles of trendlines.
For further information on combining trendlines with support/resistance, I recommend reading articles that explore this topic in detail.
Absolutely! Traders often combine the line rebounding strategy with additional indicators or oscillators to validate trade signals and enhance their trading decisions.
The line rebounding strategy works best in trending markets, where clear support and resistance levels can be identified. It may not be as effective in range-bound or choppy markets.