How to Use Trendlines in Forex Trading

Trendlines in Forex Trading

One of the characteristics of the best forex strategy is trading that follows the trend of price movements. To recognize an ongoing trend, a tool is needed to describe it. If we can draw the trendline correctly, then the line has a good level of accuracy.

How to use the trendline indicator is also very easy and simple. You only need to draw a line based on the trend of the price movement that occurs.

Trendline is a very common tool used in technical analysis. In fact, its role is very important because the best forex strategy is to trade by following the trend of price movements.

If we can draw the trendline correctly, then the line can be as accurate as other trading methods. So prepare yourself to better recognize this simple line called the trendline.

It is also very important for you to be able to identify the trend itself, because failure to recognize the trend is the beginning of your failure to make profits in forex trading.

OK, before going any further, we will discuss the types of trends first. There are basically only three trends:

Up (Uptrend)

Down (Downtrend)

Flat (Sideways)

Let's discuss one by one, the three trends above.

1. Uptick (Uptrend)

Simple. An Uptick (uptrend) is a condition when the price is moving up. But there are still prerequisites to determine that the market is in an uptrend. Take a look at the following picture.

Simple An uptrend

Caption : P = Peak, T = Trough, HP = Higher Peak, HT = Higher Trough

The prerequisite for an uptrend is the existence of a series of higher peaks and higher troughs. Since there is a sequence of words, there must be more than one. That is, there must be at least two peaks and two increasingly higher valleys.

2. Downtrend

There is no need to complicate things.A downtrend is a condition when the price is moving down. As with an uptrend, in a downtrend, there are prerequisites as well.

Simple A downtrend

Caption P = Peak T = traverse LP (Lower Peak) LT (Lower Trough)

The prerequisite for a downtrend is the existence of a series of peaks that are getting more and more valleys and troughs that are also getting lower. Since there is the word "series", then there must be more than one.

That is, there must be at least two peaks and two lower valleys.

3. horizontal, Flat (sideways)

Well, it's also simple. "Sideways" means having a movement that is neither an uptrend nor a downtrend.

What does it mean?

Yes, it's flat.

There are still ups and downs, but they are only limited to a certain range. In other words, there must be an uptrend or a downtrend we can't find.

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Simple a Flat (sideways)

Caption

P = Peak T = traverse LP (Lower Peak) HT (Higher Through) LT (Lower Trough)

We already know how to recognize trends; now we will try to be more familiar with trendlines. Of course, to be able to draw a trendline well, you must first identify the trend.

In an uptrend, draw a trendline by connecting at least two troughs. Meanwhile, in a downtrend, draw a trendline by connecting at least two peaks.

Sample an uptrend

The picture above is an uptrendline that is drawn connecting two valley points.

At this time, the trendline acts as support. A break of the trendline is an early signal that the up trend might end.

The picture below is a trendline drawn during a down trend.

Here the trendline functions as resistance. A break of the trendline might be an indication that the down trend will end.

Sample a downtrend

How about sideways?

Draw two horizontal lines that connect at least two peaks or valleys as much as possible.

After that, what else to draw?

Yes, that's all. Simple, right?

Below is an example of depicting a trendline.

An example of depicting a trendline

From the example picture above, we can see that in the price movement there can be several changes in the trend. Note that, in general, the picture above shows an uptrend, which we call the major trend.