Trend lines are simple to use and easy understand. Whether you’re a beginner or a professional trader – you’ll always draw a couple of lines on your chart. Today we’ll learn drawing support and resistance forex to do it. Can you see possible trend lines already?
Any trend line should connect at least 2 tops or 2 bottoms. 2 candle on each side of it which prices that don’t exceed the lowest point. Resistance levels, and therefore should be used for drawing trend lines when necessary. If you need help with finding tops and bottoms, use Fractals indicator, which will find every single top and bottom for you. Avoid drawing too steep trend lines as they will rarely be of any use. In addition, if such trend line is crossing any of the price bars, it’s a wrong trend line to draw.
The more tops and bottoms are connected – the stronger the trend line becomes. Some traders won’t recognize a trend line as valid until there has been at least 3 points connected. When the market starts to accelerate, the angle of a trend will increase. Any trend line sooner or later will be broken. We know that when support level is broken it automatically transforms into resistance level. Same rule applies to trend lines. When a trend line is broken, it should stay on the chart for some time, as we’ll be expecting a retest of the line in the nearest future: this retest of a broken trend line is an excellent opportunity for opening a new trade.
You won’t always see such ideal retests of a broken trend line, sometimes there will be a shorter pullback to the broken line without reaching it. Nevertheless, this is a common pattern every trader should be able to recognize. They don’t necessarily have to have an angle. R level is rather an area, not exact price. R level, but rather a test. The true break comes when price slices through the level without fear usually with a tall definitive candlestick. Trend lines are used to build price channels.
First you need to draw a regular trend line, and then copy it to create a parallel symmetrical line on the other side of the price channel. While you continue trading with the main trend line, a channel helps to project profit targets. We’ll talk more about channels when we discuss Median lines and Andrew’s Pitchfork. Different traders will draw different trend lines while looking at the same chart, which sends the message that the lines you draw might differ from lines drawn by other Forex market participants. The goal is to have the same trend lines as majority would do – this helps to trade with the majority, which is much easier. Switch your chart to the Line chart. Now switch your chart back to the Candlestick chart.
Indicators for automated drawing of trend lines. Nice Article and very clear and helpful explanation. I love this site at the first sight. I am not a technical-analysis fanatic. Yet, it helps a lot when comes to the basic principles such as trendline. Simple with Good Amount Of Clarity. Good work, may you not lack help and information.
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