What Are Line Break Charts & How To Trade Them

Line Break Charts

Line Break charts are forms of charts that measure price fluctuations without time intervals. They consist of a series of bars that form lines, showing closing prices. The charts were first discovered in Japan and introduced in the west by Steve Nison.

What are Line Break charts?

The structure of the Line Break charts resembles Renko charts, but rather than forming breaks, the Line Break chart creates bars. These bars compromises of lines. The up lines identify upward movement and are colored green or white, while the down lines signify downward movement and are colored black or red.

A keynote for traders to remember is the lines settings. The whole trading method on Line Break charts depends on the set of lines. The Line Break takes the present closing price and compares it with the previous line. Commonly, the line settings are set at three. This means that the closing price of the current line is compared with the previous two lines’ closing price. If the current price is higher than the previous prices, then an up line will occur. If it is lower, then a down line will appear. And, if the current price is similar to the previous prices, no line will emerge.

Line Break Chart
Line Break Chart

Traders should not confuse Line Break charts with candlestick charts or Renko charts. In Renko charts, there are bricks, while in candlestick charts, there are candles containing wicks or no wicks.

How to use Line Break charts?

The Line Break charts present support and resistance levels and mention breakouts. The trading signals on the chart depends on the lines settings. As mentioned earlier, three is common settings for the lines. However, traders can adjust the value according to their preference.

Traders need to measure the closing prices of the current line and the two previous lines (depending on lines value). If the current closing prices are higher, there is a chance that the price will go higher, and traders may consider entering buy positions. Contrarily, if the current closing price is lower than the previous prices, there is a downward potential, and traders may look to go short. The stop-losses could be set closer to the entry point.

The breakouts can also surface on the Line Break charts. A breakout happens when the lines move in a specific direction within support and resistance levels. As the chart is independent from time, there could be fewer chances of false breakouts but they still do exist.

Traders could also look for price reversals. When the lines change their course, price reversals may occur. To confirm a reversal, traders can look for different chart patterns like a rising wedge or double top and bottom.

Line Break charts trading strategy

Line Break charts are usable for intraday, day-trading, and long-term trading. This can be beneficial for traders looking for an alternative to candlestick charts.

Line Break charts buy strategy

  • Locate up lines after comparing current closing prices and previous closing prices.
  • Wait for the up lines to appear.
  • Enter the trade after the formation of up lines.
  • Set a stop-loss close at the recent low from the entry point.
  • Exit the trade when the lines change their course.

Line Break charts sell strategy

  • Locate down lines after comparing current closing prices and previous closing prices.
  • Wait for the down lines to form.
  • Enter the trade after the formation of down lines.
  • Set a stop-loss close at the recent high from the entry point.
  • Exit the trade when the lines change their course.

Line Break charts conclusion

Line Break charts provide potential entry and exit points and can help to prevent less false breakouts. Traders can utilize technical indicators and chart patterns to confirm the direction of the trend.

Becoming a successful forex trader can take many years of practice. It is not easy to make a living from forex trading in my opinion. It will require immense trading discipline, good money management, and a bullet proof trading plan.

Furthermore, I would combine multiple technical analysis, fundamental analysis, price action analysis and sentiment analysis to filter all forex trading signals whatever forex strategy I was using.

The methods of trading forex that are outlined within this article are just ideas. You should trade forex in a way that suits your own individual style, needs and goals.

If you would like to practice forex trading online, you can open an account with a forex broker and download a trading platform completely free of charge. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration.

Happy trading!