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Trend Lines Analysis in Forex Trading

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trend lines

trend lines

The most common yet less prominent form Technical Forex Analysis is the Trend Lines Analysis. Investors usually do not pay much attention to this analysis. Despite the fact that these lines are very easy to draw and effectively help to analyze the price movement of the currency. Still trend lines are underutilized as compared to other forms of technical forex analysis.

Significance:

If you draw it efficiently and effectively with pivot points, their results can be as beneficial and exact as other forms of technical analysis. But traders usually draw them hastily,so their results are not accurate and eventually they do not trust the results of Trend lines in forex account.

Kinds of Trends:

There are basically three kinds of Trends. These are:

  • Uptrend
  • Downtrend
  • Sideways trend

Uptrend:

The uptrend is also known as higher lows. You basically draw an uptrend line with the lowest point of Support. The Support areas are also called the Valleys in Forex Trade. The uptrend line is also referred to as an Ascending Trend Line.

forex technical analysis

Downtrend:

The downtrend is also known as lower highs.  You draw a downtrend line along the top of Resistance.  The identifiable Resistance points are also called ‘Peaks’ in Forex Trade. The downtrend line is also referred to as ‘Descending trend line’.

Sideways Trend:

Sideways Trend is also called ‘Ranging trend’.

Draw Trend Lines:

Now you just need to locate two main top points or two major bottoms and join them. That’s all.  You need just two main top or bottom points for a trend line but if want to have a valid and accurate trend line, you need to have three major top or bottom points. If the trend lines do not match and suit the market conditions then the trend line is not trust worthy. Similarly if the drawn trend line is steep, it is not reliable and it reflects that the market is definitely going to face a ‘Break’.

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