It’s a simple but surprisingly strong system. It works on all currency pairs and at any trading time. It’s called Tom Demark’s Broken Trend. Tom Demark is a specialist in technical market analysis and his bestseller “New Science of Technical Analysis”, published in 1994, outlines some innovative methods of using trend lines. His instructions on how to use a trend are very specific, and they can be useful for traders who are looking for reliable information on the use of Forex indicators. A trend is called an uptrend if the price makes higher highs and higher lows. A trend is called a downward trend if the price makes lower highs and lower lows. According to Demark, the uptrend line is drawn on the lows, and the downtrend line on the highs. Trend lines drawn on 5-minute or 15-minute charts are much less important than trend lines drawn on higher timeframes, such as 1 hour, 4 hours, or daily.
To trade with the “Tom Demark broken trend” system, you need to draw a trend line on the hourly chart and set the indicator “Momentum” with the level line 100. Moving averages EMA 9 and EMA 30 are also added to the chart. There is a “TD-DeMark-3” indicator that automatically draws Demark trend lines. The blue line here is an uptrend and the red line is a downtrend.
The “TD-DeMark-3” indicator on the chart.
Trend line breakthrough.
The position to buy opens at the opening of the next hour candle after crossing up MA 9 and EMA 30. The trend line should be broken through and the “Momentum” indicator level should be above 100. The stop is set 40 points below the entrance, and the takeprofit is from 40 to 150 points, depending on the volatility of the pair.
The position for sale opens at the opening of the next hourly candle after crossing the MA 9 and EMA 30 downwards. At the same time, the trend line should be broken through downwards, and the level of the “Momentum” indicator should be below 100. The stop is set at 40 points above the entrance, and the takeprofit with the same conditions. You can also set a trailing stop or close a deal on a reversal of the “Momentum” indicator.