Trend trading strategy in oil is very much profitable since it allows the traders to enter into the prevailing trend with very tight stop loss. Short term traders use the 5-minute chart to trade the oil with ascending or descending trend line. It is very important that the trades use at least three connecting points while drawing the trend line. After successfully drawing valid trend line traders look for a minor retracement of the oil price and price action signal to take the trade.
Let’s see an example of trend trading strategy in the oil
Figure: Trading the 5-minute chart in oil
Trading the trend line in the shorter time frame is extremely profitable since it helps the trader to earn a sizeable profit with a very short period of time. In the above figure the point A, B, and C are the three connecting point of the uptrend line in the 5-minute chart.
At point D, a bullish morning star pattern is printed on the chart which is right at the trend line support. Professional short term traders take the confluence of price action signal in the trend line support and enter long in the oil. Most of the cases traders use 1:3 risk reward ratio while trading the shorter time frame using the trendline trading strategy. Since the time frame used to draw the trend line is very small, traders should take in an entry in favor of the longer time frame trend. For instance, if the daily chart exhibits a clear uptrend in the oil than short term traders should also look for uptrend trading opportunity only, on the 5-minute chart.