Trade Forex Trading

Add Trend line on Chart

Similar to staircases, diagonal support and resistance zones shape trends, which represent sustained directional movements - either ascending or descending.

A trendline depicts the points of support & resistance for the price, based on the direction of market. For an upward moving market it will shows the points of support and for a downward moving market it will show the areas of resistance and they are used mainly by many investors to determine these resistance and support zones.

Trend Line is a straight line that connects 2 or more price points & then extends into the future to act as a level of support or resistance. There are 2 various different types: upwards and downward. It is an aspect of Forex analysis that uses line studies to try and predict where the next move will head to. A trader must know how to draw and analyze the signals derived/generated by this tool.

The basis of this market analysis is based upon the idea that the markets move in trends. They are used to show 3 things.

  • The general direction - up/down.
  • The strength of the present move - and
  • Where future support and resistance will be likely located

When trendlines point a certain way, the market usually follows that direction for a while, at least until the trendline breaks.

Putting these on a currency chart shows the general direction of the market price, which can be either going up or going down.

Shown Below is illustration of how to plot these on charts

Course: How to Draw & How to Trade Upward Move

Upwards Trend Line Analysis in Forex - Set Trend line on Chart

Training Module: Drawing and Trading a Downtrend Movement

Downwards Trend-Line Analysis in Forex - Add Trend Line on Chart - Trading Trend Lines

The MetaTrader 4 platform provides charting & trading tools for drawing these on currency charts. To plot them onto a chart, traders can use the tool provided on the MT4 platform that is shown below.

How Do I Draw Trendlines Forex? - Trading Trend Lines - What are Trendlines Signals?

To plot this on a chart, simply click the drawing tool located above in the MetaTrader 4 analysis software and select point A where you wish to start drawing, followed by point B where you want it to end. Additionally, you can right-click on the trendline and in the properties option, select the option to extend the ray by checking the 'ray check box'. If you prefer not to extend it, simply uncheck this option in your trading software. You can also modify other properties such as color and width in this properties pop-up window. You can download the MT4 software and learn analysis with it.

Traders often say the trend is your friend. Never fight it. This approach works best for trading fx currencies. Once they shift in one direction, they keep going for a while. That setup lets traders earn from market moves.

Principles of How to Draw

  1. Use candle charts

  2. The areas used to draw are along the lows of price bars in a upwards market. An upwards bullish move is defined by higher highs and higher lows.
  3. The points and levels which are used to draw are along the highs of price bars in a falling market. A downward bullish move is defined by lower highs & lower lows.
  4. The points used to plot are extremes points - the high or the low price. These extremes are important because a close beyond the extreme tells traders the trend of the forex pair may be changing. This is an entry or an exit trading signal.
  5. The more often a trendline is hit but not broken, the more powerful its signal.

There are 2 main ways of trading this set-up:

  1. The Bounce
  2. The Break

Technical Analysis Methods

A bounce signals that price is sticking to its course. When price hits a key line - like resistance in a downtrend - it bounces off and keeps heading lower. In an uptrend, price bounces upward after touching support. It's a way of saying, “Not changing direction yet.”

The break is a reversal in which the market crosses the line and begins to move in the opposite direction of the trend. The market mood turns bearish after an uptrend is broken, and it turns bullish after a downtrend is broken.

In instances of very pronounced trends, following this breakout signal, the price may enter a period of consolidation before reversing into the opposite direction. For shorter-term movements, this break signal could indicate an immediate price reversal.

In forex charts, bounces and breaks rely on support and resistance levels.

Entry, Exit & Setting stop losses:

The protective stop loss orders are positioned right beneath the entry and exit sites that this method is used to identify. Investors use the bounce as a low-risk entry strategy to make entry trades following a price retreat. These levels are where trades are made, with a stop loss positioned slightly above or below.

The trend line break is a crucial and important technical technical indicator of possible reversal. When a trend its broken price starts and begins heading in the opposite direction. This provides an early exit signal for traders to exit their open trade positions and take profits. When there is a penetration of these levels, it's a signal that the price can begin heading in the opposite market direction.

Unlike other technical analysis indicators there is no formula used to calculate a it, this setup is just plotted between 2 chart points.

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