Trendline Break Strategy

Overview

Trendlines connect swing highs or lows to define the slope of a move. When price breaks a valid trendline, momentum is shifting. The cleanest entry is not the break itself but the retest — when former support becomes resistance or vice versa.

Setup

• Instruments: forex pairs, stocks, crypto
• Timeframe: 4-hour or daily
• Requirements: trendline with at least 3 valid touchpoints, clean slope
• Indicators: trendline, 50 SMA, volume, ATR(14)

Entry rules

1. Draw a trendline connecting at least 3 swing highs (downtrend) or lows (uptrend)
2. Wait for a candle to close beyond the trendline (not just poke through)
3. Wait for the retest — price returns to the broken trendline
4. Enter on a rejection candle at the retest (pin bar, engulfing)
5. Confirm with above-average volume on the break candle

Stop loss rules

• Stop: 1 × ATR(14) beyond the retest candle's extreme
• Alternative: beyond the swing created by the break
• Maximum risk per trade: 1% of account
• Exit if price closes back through the trendline

Take profit rules

• Target 1: prior swing high/low in the direction of the break
• Target 2: measured move equal to the prior trend's height
• Trail the stop with a 20 EMA after 1R is achieved
• Minimum RR: 2:1

Risk management

Parameter	Value
Risk per trade	1% of account
Max concurrent trendline trades	3
Position size	Risk ÷ (entry − stop)
Touchpoint minimum	3 clean touches

Use the position size calculator and the stop-loss calculator to validate every entry.

Common mistakes

• Drawing trendlines to fit the narrative — only objective, multi-touch lines count
• Entering on the break instead of the retest (lower win rate)
• Treating an unsustained intraday poke as a "break" — require a close

Key principle

The trendline defines the slope; the break signals the shift; the retest confirms it. Patience for the retest transforms a 40% win rate into a 60%+ win rate with similar reward.