Trend Line

Trend line is one ot the most common tool of technical analysis. If drawn correctly, it can help you to identify the right direction to trade.

To draw a trend line properly, all you have to do is locate two major point (tops or bottoms), connect them and extend the line into future.

There are three types of trend:

Uptrend: market is in uptrend if it makes a higher high and higher low

CAD/JPY 1H chart

AUD/USD 5M chart

EUR/USD 5M chart

Downtrend: market is in downtrend if it makes a lower high and lower low

EUR/JPY 5M chart

No trends: market is no trend if it neither makes a higher high or lower low

CAD/CHF daily chart

EUR/GBP daily chart

CHF/JPY 4H chart

Some important things to remember about trend line:

- It takes at least two point to draw a valid trend line but it takes three point to confirm that trend line.

- Like horizontal support and resistance levels, trend line becomes stronger the more times it is tested.

- Do not expect that the price will stop right at the trend line, you have to think about it as a zone.

Disclaimer

Foreign Exchange trading carries a high level of risk, and may not be suitable for all investors. Before deciding to trade any Forex Exchange financial instruments you should carefully consider your investment objectives, level of experience, and affordable risk. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with the Foreign Exchange trading, and seek advice from an independent financial advisor if you have any doubts.