3LPB Charts
Three Line Price Break (3LPB) charts define the underlying trend and are considered as an
adjunct to the candlestick charts. 3LPB charts display a series of vertical boxes or candles that
are based on price changes. The 3LPB method entirely dispenses with the recording of the
volume sales and time data on the X-Axis. The other major charting techniques like Point &
Figure, Kagi and Renko charts also ignore the passage of time and volume.
The 3LPB are always constructed based on closing prices. A basic understanding of 3LPB is
when there are three white successive candles, the major trend is up, and when there are three
successive black candles, the major trend is down. The major reversal signals (based on the
3LPB technique) are given when the shift lines, white to black or black to white are formed.
After forming a confirmed trend of 3 white candles or 3 black candles, the reversal is only
triggered if the current price is traded below the lowest of all prior three candles in case of a
bullish trend reversal, or if the current price is traded above the highest of all prior three
candles in case of the bearish reversal.
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Trading with 3LPB
The 3LPB charts below show major trend changes. A trend change confirmation is made when a reversal bar is formed. However, a trend confirmation bar could be late and a significant move to the upside or downside may have already happened. A solution for this problem could be an intra-day trading signal for confirmation of the trend. The 3LPB charts also use other indicators and pattern formations to indicate price trends. The best trade signals are generated when the market reverses near the key support and resistance levels.
Trading 3LPB Charts
The chart above shows an example of a 3LPB pattern from the Russell 2000 E-Mini oneminute chart. Candle A shows a Three Line Price Break reversal to the upside from the previous trend as the price closed above the high of the three candles. A "long" entry is placed at 831 level. A stop order is placed at the low of this breakout candle at 830. Targets are either taken with a reversal candle or at a pre-set target limit. One of the best techniques to place a target is to take the length of the reversal bar and use 2 times the length of the bar as the target. At candle B, a 3-Bar reversal candle is formed to enter a "short" position below the low of candle B. A "stop" order is placed above the high of Candle B. A target of twice the length of the candle is placed below the entry level.
Trading 3LPB with Triangle Formation
The chart above shows a Three Line Price Break chart from the Russell Emini one-minute chart. The chart shows an ascending triangle pattern formation as the upper trend line was tested three times. The price closing outside the upper trend line signals a potential long trade.1. Enter a "long" trade above the high of the breakout bar.
2. Place a "stop" order below the low of the breakout candle.
3. In an "Ascending triangle" pattern trade setup, the depth of the triangle is added to the breakout level for a target.
Visit this link to watch video about Three line Break chart :
Three line Break chart
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Trading 3LPB Charts |
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