What separates good from great trading is every trader’s analysis. To make the most profitable trades, you must understand everything about the market. Understanding only the terms won’t cut it.
As a trader, you’ve to understand and anticipate the trends. Are you using trend lines in your trading? You might’ve heard of the trends but, haven’t used them in your trading.
You’re making a huge mistake. All types of trend lines are the most useful and underused analysis in forex trading. Want to learn what forex trends can help you improve your trading?
What Is a Trend Line?
Trend lines are lines drawn to show the predominant direction of the price. The biggest mistake traders make is drawing trend lines wrong. You’ve to draw trend lines under pivot lows or over pivot highs.
Forex trend lines are a great tool for any trader if drawn right. Most people draw the trend lines to fit the market instead of the other way around. If you don’t draw the line right, you won’t be able to forecast the forex trends.
A successful trader assesses risk but, also hits the mark when anticipating the market trends. Trend lines show a trader the patterns, direction, and speed of the price. Using this information, you can make even more profitable trades.
What Are the Types of Trend Lines?
You might think that drawing the trend lines is difficult. Yet, that’s far from the truth. Drawing your trend line is easy.
You’ve to identify and connect two major pivot tops or bottoms. To understand and identify these lines, you must learn the types of forex trend lines. Here are the 3 types of forex trend lines you’ll see in the market:
Downtrends have lower highs. You’ll draw these trend lines along the top of the resistance peaks. Most of the time this trend signals that investors are more willing to sell than buying the asset.
An uptrend is drawn at the bottom of the support peaks. This trend has higher lows.
When we see an uptrend, it signals that there’s a high demand for the asset. This can translate into the price of the currency stay rising steadily.
3. Sideways Trends
A sideways trend is a range because it happens when there’s horizontal price movement. When you draw this trend line, it’s a horizontal line. You won’t see any valleys or peaks.
We’ll see this type of forex trend when the demand and supply of the asset are head to head. Most of the time, this happens before the asset reverses or continues a prior trend.
Will Trend Lines Help Your Trading?
Yes, trend lines will help take your trading to the next level. You should understand and, identify all types of trend lines. Drawing trend lines is easy but, you must confirm the forex trend.
Remember that only when you connect 3 tops or bottoms is the trend line confirmed. Also, if your trend line keeps getting steeper it will lose its reliability. Don’t forget that forex trend lines aren’t drawn to fit the market.
Want to get in on how win big on your trading? Check out our blog post to learn more.