There are two types of trendline:
Bearish Trendlines
Bullish Trendlines
Bullish Trendlines
We have a bullish trend when the Forex pair is increasing. In this manner, the price of the pair records higher bottoms and higher tops.
The bullish trend line should be located below the price action and it should connect the bottoms of the currency pair. This way the bullish trend line acts as a support for the price action.
How to Properly Draw and Trade Trendlines
FOREX TRADING ARTICLES
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Many traders are familiar with trading price action techniques using horizontal support and resistance lines, but some traders find it difficult to trade using trend lines, and this is rightfully so, since trendline analysis requires a little more discretion on the part of the trader. Trendlines are very useful in helping you determine the trend, and also the strength of that trend as well. Today we are going to take a closer look at this important price action analysis technique.
Download the short printable PDF version summarizing the key points of this lesson…. Click Here To Download
What are Forex Trendlines
Trendline analysis in Forex is a crucial price action method that helps us first and foremost in trend detection. Trendlines measure the price move of a Forex pair when the price is increasing or decreasing. In this manner, there are two types of trendlines:
1) Bullish Trendlines
We have a bullish trend when the Forex pair is increasing. In this manner, the price of the pair records higher bottoms and higher tops.
The bullish trend line should be located below the price action and it should connect the bottoms of the currency pair. This way the bullish trend line acts as a support for the price action.
2) Bearish Trendlines
The bearish trend has the opposite character of the bullish trend. We use a bearish trendline in order to measure the price action during a price decrease.
In this manner, the bearish trend requires the price to record lower tops and lower bottoms. This indicates that the price is dropping. The bearish trend line should be located above the price action during a price decrease. The bearish trendline plays the role of resistance for the price.
How to Draw a Trendline
In order to draw a trendline (bearish or bullish), you first need to identify a trend. So, let’s have a look at a chart.
In order to gain a better understanding of how to draw trend lines, we must first recognize the composition of the typical candlestick bar. Every Japanese candlestick consists of five elements – body, top of the body, bottom of the body, upper candlewick, and lower candlewick. We need to understand these elements in order to build a proper trendline. So, if you want to build a bullish trendline, you need the spot the lower candlewicks and the candle body bottoms on the chart. Most times you would use the candlewicks to compose the trendline, however, you could use the candle body in instances where short-term volatility spikes occur outside the normal range of the sloping trendline. Then, if the price is moving upwards, you connect these with a straight line.
Three Important Rules for Building Trendlines
1. In order to confirm a trend, you need at least three points lying on the same line!
2. Never think of the trend as contained within a single line. The trend is not a line, but an area.
3. Trading the Trending Move
Bearish Trendlines
Bullish Trendlines
Bullish Trendlines
We have a bullish trend when the Forex pair is increasing. In this manner, the price of the pair records higher bottoms and higher tops.
The bullish trend line should be located below the price action and it should connect the bottoms of the currency pair. This way the bullish trend line acts as a support for the price action.
How to Properly Draw and Trade Trendlines
FOREX TRADING ARTICLES
Twitter 0Facebook 0Google+0
Many traders are familiar with trading price action techniques using horizontal support and resistance lines, but some traders find it difficult to trade using trend lines, and this is rightfully so, since trendline analysis requires a little more discretion on the part of the trader. Trendlines are very useful in helping you determine the trend, and also the strength of that trend as well. Today we are going to take a closer look at this important price action analysis technique.
Download the short printable PDF version summarizing the key points of this lesson…. Click Here To Download
What are Forex Trendlines
Trendline analysis in Forex is a crucial price action method that helps us first and foremost in trend detection. Trendlines measure the price move of a Forex pair when the price is increasing or decreasing. In this manner, there are two types of trendlines:
1) Bullish Trendlines
We have a bullish trend when the Forex pair is increasing. In this manner, the price of the pair records higher bottoms and higher tops.
The bullish trend line should be located below the price action and it should connect the bottoms of the currency pair. This way the bullish trend line acts as a support for the price action.
2) Bearish Trendlines
The bearish trend has the opposite character of the bullish trend. We use a bearish trendline in order to measure the price action during a price decrease.
In this manner, the bearish trend requires the price to record lower tops and lower bottoms. This indicates that the price is dropping. The bearish trend line should be located above the price action during a price decrease. The bearish trendline plays the role of resistance for the price.
How to Draw a Trendline
In order to draw a trendline (bearish or bullish), you first need to identify a trend. So, let’s have a look at a chart.
In order to gain a better understanding of how to draw trend lines, we must first recognize the composition of the typical candlestick bar. Every Japanese candlestick consists of five elements – body, top of the body, bottom of the body, upper candlewick, and lower candlewick. We need to understand these elements in order to build a proper trendline. So, if you want to build a bullish trendline, you need the spot the lower candlewicks and the candle body bottoms on the chart. Most times you would use the candlewicks to compose the trendline, however, you could use the candle body in instances where short-term volatility spikes occur outside the normal range of the sloping trendline. Then, if the price is moving upwards, you connect these with a straight line.
Three Important Rules for Building Trendlines
1. In order to confirm a trend, you need at least three points lying on the same line!
2. Never think of the trend as contained within a single line. The trend is not a line, but an area.
3. Trading the Trending Move