Forex Internal Trend Line Explained: Strategies for Buying and Selling

In previous articles, we explained ascending and descending trend lines. But now, we want to introduce a new and very important trend line: the internal trend line. With this trend line, you can open both long and short positions, making it a very profitable trading strategy. To help you understand, let’s take an example: suppose we have an ascending trend line. Based on the direction of this ascending trend line, we open buy positions and start trading.

However, if our trend line breaks, after the break, the market pulls back to the trend line and then enters a downward trend. In other words, after each pullback, the market moves downward, and our trend line turns into a descending trend line.

Our trendline initially starts as an upward trend, but after it breaks, it turns into a downward trend. To fully understand this type of trendline, which we call an “internal trendline,” we draw your attention to the following example.

This strategy helps traders identify key moments of market trend reversals and make more informed decisions. By using this trendline, you can profit from market movements in both upward and downward directions, that is, whether the price trend is bullish or turning bearish. By timely recognizing these changes, you can maximize your profits and minimize potential losses.

Photo by TradingView

In the above chart, there is initially a downward trendline where the price declines upon touching it. However, eventually, the price breaks this trendline upwards, then after a pullback to it, starts moving upward, and we can consider this point as the trend reversal from bearish to bullish. This breakout indicates a potential shift in market sentiment from a downtrend to an uptrend.

Very important points to know about this strategy

1_This type of trendline usually does not have a very steep slope. Its gentle angle makes it more reliable for identifying potential trend reversals, as very steep slopes often lead to false signals or rapid price corrections.

2_The internal trendline strategy gives us the freedom to profit from both long and short positions; however, using this strategy requires patience and precision. Additionally, observing price behavior around and near the trendline is very important to enter the right positions and accurately identify the price movement direction and its trend, which in turn helps prevent losses and achieve profits.

We hope you enjoyed this article.