Trending lines have played an important role in defining the movement of price in a certain timeframe. Traders are of the opinion that it is trend lines that form the basis for technical analysis. Drawn with perfection, Line trade Forex can prove to be an excellent tool. Experts believe that it is the markets which should drive their movement and not the other way. Like a linearly plotted line on a graph, this trend shows the up/downward movement of prices against time.
An uptrend shows the upward movement of prices which prompts traders to get ready for selling action. Preferably they should be drawn in accordance with lowest points of a support level. Likewise, downtrends prompt traders to prepare for buying and join the uppermost points of resistance levels.
Apart from trending (in its truest sense) lines, there is occasional sideway trending as well. This throws light on indifferent nature of the market against economic factors functioning.
Drawing the perfect Forex trends on line:
• Followers of ‘Trend is your friend’ doctrine opine that trends should always be drawn with at least 2 tops (down trend) or 2 bottoms (uptrend). However, it takes 3 tops and 3 bottoms respectively to confirm a trend.
• Your trend line should confirm/respond to the changing market setup particularly in a volatile environment. If it’s very inelastic, it implies that its less responsive and might hint a breakout.
• Trend line should also confirm with the market movement. Thus a positive boost to the balance of payments will force prices to improve. Traders should prefer not forcefully fitting the trend with the market.
Line trade Forex and Forex Channels:
Instead of one single trend to determine a flow, traders often choose to draw a pathway or a range of up/down trends. The movement of a row of candlesticks provides information on market movement and possibility of reversals. Forex channels have uptrends both above and below the highs and lows.
Forex channels are potential support and resistance levels and provide potential buying/selling information. So for an up channel one draws it by connecting the peaks and troughs thereby creating a band of up trends from both sides. Similarly, downtrends are made by connecting crests and troughs of downward moving chunks of price movement.
Special features of trend lines for better trading:
A Line trade Forex uptrend means that prices are rising high so you should prepare yourself for buying your currency amounts. During an uptrend, one should consider buying at the point where candlesticks hit the uptrend. This causes them to bounce back with inertia.
Trading in the direction of trends allows traders to move with the market flow. Additionally, it also helps traders to make immediate changes in response to occasional bounce backs. Experts believe that placing a trade in the right trend definitely gives an advantage over trading otherwise.
Thus Line trade Forex guides traders to the market momentum, and it offers potential support and resistance levels. This allows traders to make a prior planning of their buying/selling options. Plus it is simple to understand and does not require any complex calculations or statistical knowhow.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.