How to Analyze a Chart using Trends
How to Analyze Charts using a Trend
To analyze charts using trends traders will have first to spot a trend.
How Do you as a trader identify a trend on a chart - to identify a trend on a chart traders will need to know the correct method of determining a trend - a trend is a general price direction in the prices where prices either move up or down.
When the trend is moving upwards it means that prices are closing higher than where they opened and therefore the general trend direction of prices is upwards.
When the trend is moving down ward it means that prices are closing lower than where they opened & therefore the general trend direction of prices is down-wards.
To identify a trend on the charts one will use a series of price highs or price lows.
Traders then will draw a trend-line connecting price highs or price lows and this trend line will then determine direction of the trend whether up-wards or downward.
Upwards Trend
To identify an up-wards trend - traders will identify gold price lows which are sloping upwards & then use these price lows to draw a trend-line - up-wards trend line to connect these price lows & once this upward trend-line is plotted on the chart it will then be used to identify the upwards trend.
Analyze a Chart using Trends - How to Analyze a Chart using Trend
When the price moves up it forms higher highs and higher lows forming an up-wards price movement. An upwards trend-line then can be plotted by connecting the price higher lows.
To draw this up-ward trend line - we use support areas. To draw the up-wards trendline correctly two support zones are needed.
Upwards Trend-Line on Chart - How to Analyze a Chart using Trends
XAUUSD Downwards Trend
To identify a downward trend - traders will identify gold price highs which are sloping downwards & then use these price highs to draw a trend-line - down-wards trend line to connect these price highs & once this down-wards trendline is plotted on the chart it will then be used to identify the downward trend.
Analyze a Chart using Trends - How to Analyze a Chart using Trend
In learning how to draw trend-lines & identifying trends on charts, you need to know that when prices are moving they form lower lows and lower highs forming a downwards price direction. These are points which are then used to draw the down-wards trend line.
To determine a downward trend - we use resistance levels to draw a downwards trend-line & to spot a down-wards trend correctly 2 resistance levels are needed.
Downwards Trendline on Chart - How to Analyze a Chart using Trends
Once traders draw & identify a trend using trend-lines - traders will then open trades in the direction of this trend. This is because once prices begin to move in a trend direction either up-ward or down-wards - the prices will keep moving in this direction for some time - this is why traders will determine the trend first and use this trend to open trades which are in the direction for the trend.
Interpret Trends?
