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Home  >  Technical analysis  >  Trend analysis  >  Forex trend lines

Forex trend lines

The stock market is certainly an opportunities galore for the investor. The market brings along several options for the average investor to earn some good bucks. But investment in any form is no child's play and calls for a lot of factors to be kept into consideration. So if Forex is what you have been thinking of for long, then there is a lot that you need to know prior to taking the plunge.

Even if you are a minor player in the world of Forex and trading futures, you shall very well know the worth of good information. Here good information is even more precious than gold and diamonds. But good information may not be handy all the time. At times you might need to hunt for the vital information that is going to make your investment worthwhile. In other situations you could even seek help of tools like Forex trend lines.

These trend lines prove to be a vital source of information and indicate the profitable points in the stock market. They help you ensure that you invest on the right spot. Based on the trends in the market, these lines point at the favorable opportunities giving you a clear idea where your profit and loss lies respectively. So if you are venturing into the world of Forex, considering these lines will prove to be extremely valuable.

A lot of highly valuable information can be obtained with the use of these trend lines. The most important of all the information offered by these trend lines is the current trend or direction of price move. These otherwise simple lines give you a clear indication of whether a price is moving in the upward or downward direction. Based on these calculations and information, trend lines enable you top take the right and a profitable decision.

It is not just the direction of price move that is inflicted by these trend lines. Forex trend lines deliver other valuable information too such as the points of support and resistance levels for market price. All this information proves to be vital in helping you platy your cards safe. To add on, you also get to know the right entry and exit points. So you know exactly when to invest and disinvest. The best positioning for profit taking and placing protective stops can also be known with these lines.

We all know that the world of stock market is very dynamic and is on a constant change. At times it may happen that the price may be in an upward direction but could reverse suddenly as a result of various factors. It is important for you to know these reversals if you do not want to incur a loss. Forex trend lines help you know of these reversals and thus help you take necessary action on time.

There three main types of trends (depending on trend duration):

  • primary
  • intermediate
  • short-term

Also there is another classification of trends (depending on trend direction):

  • Uptrend
  • Downtrend
  • Flat (Sideways) trend

Up trend: As the trend moves upward, the U.S. dollar is appreciating in value. An Up Trend is defined by a series of higher highs and higher lows.

Down trend: As the trend moves downward, the U.S. dollar is depreciating in value. A Down Trend is defined by a series of lower highs followed by lower lows.

Sideways trend: Prices are moving within a narrow range. (The currencies are neither appreciating or depreciating.) A Sideways Trend is defined by a series of relatively equal highs and lows.

Now that you know of all the benefits that these simple lines have to offer, you sure would want to know how to draw them. Drawing trend lines is no rocket science and can be done with ease. You just to know of the swing pints of the price move and you can simply create a trend line by joining the highest or lowest of the swing points.

If the price move happens to be in the upward direction, the trend line is going to be below the pattern formation. This is because when the trend is going to change, the trend line is going to be crossed by the pattern formation. The trend line is drawn through the lower swing points of the price move. Simply connect two lowest points of the price move and you r trend line would be formed. The reverse is applicable for a downward price move.

So what's stopping you? All you need to earn those coveted bucks is draw lines. Simple indeed!

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