The Price Action Trendline Strategy is a technical trading method that uses clean chart analysis to identify trade opportunities based on the interaction between price and trendlines. This strategy helps traders capture pullbacks, breakouts, and retests using simple yet highly effective tools—trendlines drawn from key swing highs or lows, combined with price action signals like pin bars, engulfing candles, or inside bars.

It is particularly well-suited for forex, indices, and commodities across H1, H4, and daily timeframes.

What Is a Trendline in Price Action Trading?

A trendline is a diagonal support or resistance line that connects two or more swing points. It helps visualise the direction and strength of a market trend.

• Uptrend: Connects higher lows
• Downtrend: Connects lower highs
• The more times price respects the trendline, the more valid and powerful it becomes

Strategy Objective

• Identify high-probability entries during trend continuations or reversals
• Use trendlines to define dynamic support and resistance
• Enter trades based on price action confirmation at or near these lines

Indicators and Tools Required

• Clean candlestick chart (no indicators required)
• Manual trendline drawing
• Optional: RSI or ATR for momentum or volatility context

Step-by-Step Strategy Setup

Step 1: Identify Market Structure

• Look for clear trending conditions: higher highs and higher lows for uptrends, or lower highs and lower lows for downtrends
• Avoid using trendlines in tight consolidations or overlapping candles

Step 2: Draw the Trendline

• For uptrends: connect at least two higher lows
• For downtrends: connect at least two lower highs
• Extend the line into the future to anticipate future reactions

Step 3: Wait for Price to Approach the Trendline

• Monitor how price behaves as it nears the trendline
• Look for signs of rejection or break depending on your trade setup

Step 4: Look for Price Action Entry Signals

• Reversal setup: Pin bar, engulfing candle, or doji bouncing off the trendline
• Breakout setup: Strong candle closing beyond the trendline, often followed by a retest
• Inside bar: Consolidation along the trendline, followed by breakout in trend direction

Step 5: Entry

• Reversal trade: Enter on candle close or break of confirming price action signal
• Breakout trade: Enter on breakout candle close or after retest of the trendline

Step 6: Stop Loss

• Place below the trendline and below the wick of the reversal candle for longs
• Above the trendline and above the wick for shorts
• Alternatively, use 1x ATR as a volatility buffer

Step 7: Take Profit

• Use previous swing highs/lows, Fibonacci levels, or 1:2 risk-to-reward ratio
• Trail stops using higher highs/lows or structure if trend continues strongly

Example: EUR/USD H4 Trendline Bounce

• EUR/USD in an uptrend; trendline drawn connecting two higher lows
• Price pulls back and forms a bullish pin bar at the trendline
• Entry: Long at close of pin bar
• Stop Loss: Below trendline and candle low
• Take Profit: Previous swing high or 2x risk

Best Timeframes and Markets

• Timeframes: H1, H4, Daily
• Markets: EUR/USD, GBP/JPY, NAS100, Gold, Oil
• Avoid ranging markets or unclear structure

Optimisation Tips

• Use trendlines in combination with horizontal levels or moving averages
• Only trade trendline touches with clean, obvious wicks and structure
• Avoid over-adjusting trendlines to fit random touches—stick to clear market structure
• Combine with volume spikes or RSI divergence for added confirmation

Advantages

• Clear visual structure
• Works across all asset classes
• Great for both breakout and bounce traders
• No lagging indicators required

Limitations

• Subjectivity in drawing trendlines
• False breakouts may occur during news events or in low liquidity
• Not effective in choppy or sideways markets

Conclusion

The Price Action Trendline Strategy offers a clean, disciplined way to trade with the trend using simple yet powerful market geometry. By mastering how price interacts with trendlines and confirming signals through price action, traders can significantly improve their accuracy and confidence.

To build this strategy into a complete trading system and learn how to trade like institutional professionals, enrol in our Trading Courses and take your technical trading to the next level.