Quick Tip On Drawing Trendlines
Does this video cover everything you need to know about trendlines? Probably not, but it's a good start.
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We have Shona here with a quick question asking us just to do a quick review of how to draw trend lines, because there seems to be so many different ways to do it and they can sometimes get a little bit confused on which one is correct.
Now looking at trend lines there's quite a couple of ways, different ways that traders draw these on the charts, but something that that helped me when I just started trading was realizing that a trend line is really nothing more than just a support and resistance zone.
Yes, it's moving diagonally over the chart instead of horizontally, but it's still just showing you the exact same thing which is a support and resistance area. And that alone should help to some extent for figuring out how to draw them.
A crucial thing to start with is that you usually want to see at least two or three areas where the trend line is confirmed or respected. So the more touches or the more confirmed reactions from a trend line, the more credible or more important the level will be. Again, just like horizontal support and resistance areas, right, so let's take this one on the Euro versus the US dollar.
We can see that just normal support-resistance area, very interesting because we had resistance first but it came back to act at a support, against support, almost support and now we've broken through and now it's acting as resistance. So in the same way you're looking for multiple touches, multiple confirmations for that trend line.
So we can see here multiple touches, right? So very, very high confluence here, lots of reactions from that specific support area.
So, always keep in mind that the more touches, the more credibility, the more important the line will be. Obviously, the higher you go in timeframes, it'll also change in terms of importance as well. So the more confluence, the more valuable, the more useful the line will be.
Now, generally speaking, when you have an upwards moving trend, you would usually want to use your trend line to see where support is sitting at, right? Because you're expecting the move to the upside, you're basically looking at possible support areas to try and reengage that trend to the upside. So it makes sense to draw your upward sloping trend from the swing lows, right?
So you want to look for support for that upward moving slope. And usually when you have a downtrend, or downward sloping move, you're going to be looking to place it on the highs because you're going to find areas where we think the market will pull back to, to find resistance, to be able to reengage the pay, of course, to the downside.
So keep that in mind in terms of how to draw it. But having said that, you know, as they are just basically diagonal support and resistance levels, you can also have a trend line for an upward sloping move on the swing highs that basically tracks potential resistance areas again.
And something that you can do as a tip, you know, to try and find the overall trend, so to speak, the overall resistance or the overall support is apart from looking at the wick, sometimes if you have a very volatile pair, you might have a little bit of an overshoot like this one. And if it's a very tricky pair, you might sometimes be a little bit confused on where to exactly draw it.
And the tip that I got when I started trading was actually to take away the wick so just drop down to something like a line graph and see whether you have the overall direction of the trend in place because remember, your line graph won't have all of the wicks in place, it is only going to track the closes, the candle closes.
Obviously, as we said, you know, try and think of it as just support and resistance levels. It's really nothing more than that. It's just diagonally or upward sloping and downward sloping support and resistance areas. Apart from just looking at us as a trend itself with support and resistance, you can also consider drawing it as a channel itself.
So there's many tools that you can use to trade with, obviously looking for that resistance and support. So, a couple of things you can you can do to, you know, draw it a little bit easier. Any other questions, any other things that you're confused with please don't hesitate to let us know.
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If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://bit.ly/2HFykNd
-----
We have Shona here with a quick question asking us just to do a quick review of how to draw trend lines, because there seems to be so many different ways to do it and they can sometimes get a little bit confused on which one is correct.
Now looking at trend lines there's quite a couple of ways, different ways that traders draw these on the charts, but something that that helped me when I just started trading was realizing that a trend line is really nothing more than just a support and resistance zone.
Yes, it's moving diagonally over the chart instead of horizontally, but it's still just showing you the exact same thing which is a support and resistance area. And that alone should help to some extent for figuring out how to draw them.
A crucial thing to start with is that you usually want to see at least two or three areas where the trend line is confirmed or respected. So the more touches or the more confirmed reactions from a trend line, the more credible or more important the level will be. Again, just like horizontal support and resistance areas, right, so let's take this one on the Euro versus the US dollar.
We can see that just normal support-resistance area, very interesting because we had resistance first but it came back to act at a support, against support, almost support and now we've broken through and now it's acting as resistance. So in the same way you're looking for multiple touches, multiple confirmations for that trend line.
So we can see here multiple touches, right? So very, very high confluence here, lots of reactions from that specific support area.
So, always keep in mind that the more touches, the more credibility, the more important the line will be. Obviously, the higher you go in timeframes, it'll also change in terms of importance as well. So the more confluence, the more valuable, the more useful the line will be.
Now, generally speaking, when you have an upwards moving trend, you would usually want to use your trend line to see where support is sitting at, right? Because you're expecting the move to the upside, you're basically looking at possible support areas to try and reengage that trend to the upside. So it makes sense to draw your upward sloping trend from the swing lows, right?
So you want to look for support for that upward moving slope. And usually when you have a downtrend, or downward sloping move, you're going to be looking to place it on the highs because you're going to find areas where we think the market will pull back to, to find resistance, to be able to reengage the pay, of course, to the downside.
So keep that in mind in terms of how to draw it. But having said that, you know, as they are just basically diagonal support and resistance levels, you can also have a trend line for an upward sloping move on the swing highs that basically tracks potential resistance areas again.
And something that you can do as a tip, you know, to try and find the overall trend, so to speak, the overall resistance or the overall support is apart from looking at the wick, sometimes if you have a very volatile pair, you might have a little bit of an overshoot like this one. And if it's a very tricky pair, you might sometimes be a little bit confused on where to exactly draw it.
And the tip that I got when I started trading was actually to take away the wick so just drop down to something like a line graph and see whether you have the overall direction of the trend in place because remember, your line graph won't have all of the wicks in place, it is only going to track the closes, the candle closes.
Obviously, as we said, you know, try and think of it as just support and resistance levels. It's really nothing more than that. It's just diagonally or upward sloping and downward sloping support and resistance areas. Apart from just looking at us as a trend itself with support and resistance, you can also consider drawing it as a channel itself.
So there's many tools that you can use to trade with, obviously looking for that resistance and support. So, a couple of things you can you can do to, you know, draw it a little bit easier. Any other questions, any other things that you're confused with please don't hesitate to let us know.
-----
If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
