Add Trend-Line on Chart

Sometimes support and resistances are formed diagonally in a similar way like a staircase. This forms a trend which is a sustained movement in one direction either upwards or downwards.

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 mainly used by many investors to determine these resistance and support levels.

Trend Line is a straight line that connects two or more price points & then extends into the future to act as a level of support or resistance. There are two different types: upward 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 interpret signals generated by this tool.

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

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

If lines forms in a certain direction then market usually moves in that direction for a period of time until a time when it's broken.

Plotting these on a currency chart portrays the general trend of the market which can either be upward or down-wards.

Shown Below is example of how to plot these on charts

Course: How to Draw & Trade Upward Move

Course: How to Draw and Trade Downward Move

The MetaTrader 4 software provides charting tools for drawing these on currency charts. To plot them onto a chart, investors can use the tool provided on the MetaTrader 4 software that is illustrated below.

To plot on this on a chart just click the drawing tool above on the MT4 analysis software and select point A where you want to begin drawing and then point B where you want the it to touch. You can also right click in trendline & on properties option select option to extend ray by checking 'ray check box', if you do not want to extend it, then untick this option in your platform. You also can change other properties such as color and width on this property popup window of the properties. You can download MT4 software & learn analysis with it.

The trend is your best friend. Is a popular saying among investors because you never should go against it. This is most reliable method to trade because once currencies start to move in one direction they can move in that particular direction for quite some time - therefore using this method presents opportunity to make profits from the market.

Principles of How to Draw

1. Use candlestick charts

2. The areas used to plot are along the lows of price bars in a upwards market. An upward bullish move is defined by higher highs and higher lows.
3. The points used to draw are along the highs of the 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 critical because a close beyond the extreme tells traders the trend of the forex pair might be changing. This is an entry or an exit signal.
5. The more often a trendline is hit but not broken, the more powerful its trading signal.

There are two main ways of trading this setup:

1. The Bounce
2. The Break

Technical Analysis Methods

The bounce is a continuation signal where price bounces off this line to continue moving in the same direction. In a downwards move, the market will bounce downward after hitting this level which is the resistance level. In an upward move, the market will bounce upward after hitting this level which is the support level.

The break is a reversal where the market goes through the line and starts moving in the opposite direction. When an uptrend is broken then sentiment of the market reverses & becomes bearish and when a downtrend is broken then the sentiment reverses and becomes bullish.

For very strong trends, after this break signal, the price will consolidate for some time before moving in the opposite market direction. For short term trends then this break signal will mean price might reverse immediately.

In currency, both the bounce & the breaks that are used in analysis charts are based upon these levels being support and resistance.

Entry, Exit and Setting stops:

This method used to determine good entry and exit points, protective stops are placed just below them. The bounce is a low-risk entry method used by investors to place entry trades after price has retraced. Trades are setup along these levels and a stop loss placed just above or below.

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

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