Trendlines For Additional Filtering

I love trendlines. I'm not an expert at them but they sure help in filtering out trades especially when used with indicators. Here are some trades I've done using trendlines. The chart below is a daily chart of the EUR/USD currency pair. Indicators are CCI and Bollinger Bands with standard settings. It's not necessary to use both since both reflects oversold/overbrought conditions. I also have a 55 exponential moving average on there. The thick yellow lines are my trendlines.



The EUR/USD has been in a trading range for some time and I really didn't need to use trendlines to trade it for I could had sold near resistance and brought near support. The trendlines added that additional safety for me.

For example, when the CCI indicator is in an overbrought territory ( above 100 ), I look for reversal opportunities. Usually, when CCI cross below 100 from an overbrought condition it's a selling opportunity. However, you can get false crosses. The trendlines help to avoid the false signals. I draw a trendling from the last pivot low, and extend it joining higher lows of the up trend move. If CCI cross 100 from overbrought and also break and close below the trendline, I can safely put in my sell entry.

Does this always work? Of course not. So in order to protect myself, my stop will be above the previous pivot high. My target will be the next level of support or I would take some profits when price reach the middle Bollinger band and then move my stop to break even.

Sam Seiden explained a strategy on FXStreet.com, using CCI or Stochastics with 20 or 50 moving average, to place high probability/low risk trades in the direction of the trend. I do incorporate his techniques into my strategies so credit goes to Sam Seiden where it is due.
http://transcripts.fxstreet.com/2008/05/the-importance.html
I've added trend lines to that strategy and it works pretty well.

Strategy is for educational purposes only. Please backtest any strategy before using live.