In forex trading, trend lines are arguably the most used type of technical analysis.
They’re also possibly one of the most underutilized.
They can be as accurate as any other method if drawn correctly.
Unfortunately, the majority of forex traders do not draw them correctly or attempt to make the line match the market rather than the other way around.
An uptrend line is formed along the bottom of plainly recognized support regions in their most basic form (valleys).
This is the rising trend line.
The trend line is formed along the top of plainly recognized resistance points in a decline (peaks).
This is the clinging trend line.
How do you draw trend lines?
To properly design forex trend lines, simply select two big peaks or bottoms and connect them.
So, what’s next?
There’s nothing.
Is that all there is to it?
That’s all there is to it.
Here are some examples of trend lines in action. Those waves are incredible!
Types of Trends
There are three types of trends:
- Uptrend (higher lows)
- Downtrend (lower highs)
- Sideways trend (ranging)
Here are some important things to remember using trend lines in forex trading:
A good trend line requires at least two tops or bottoms, but it needs THREE to validate a trend line.
The STEEPER the trend line, the less dependable it will be and the more probable it will break. Trend lines, Like horizontal support and resistance levels, get stronger the more they’re challenged.
Last but not least, NEVER create TI by forcing them to match the market. If they don’t fit properly, that trend line isn’t genuine!
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