Forex trend line earrings

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Uptrend Downtrend In an uptrend, you draw a trend line by connecting lows. As the market advances, the lows occur at higher and higher prices resulting in an upward sloping trend line. In a downtrend, you draw a trend line by connecting lows. As the market declines, the lows occur at lower and lower prices resulting in a downward sloping trend line. There are multiple highs and lows in each trend, which can be confusing for new traders. You want to focus on price points that stand out.

For example, you might decide to only draw up trend lines that connect highs or lows that have at least ten candles to the left. This will help to avoid confusion about where to draw the trend line. You only need two points to draw a trend line.

The key is not to have the most touches nor it is whether you connect wicks or closing prices. Instead, it is to understand what the market is telling you. Keep on reading for a more elaborate discussion on this. No trends exist in the vacuum of a single time frame.

Thus, the same chart can show multiple trends. For example, the market might be falling on the 1-hour chart but zooming out from the same hourly time frame can show an entirely different picture. What should you do in situations like this?

How do you know which trend line to trust? To avoid confusion, you must utilize a top-down approach. Each time you analyze a currency pair, begin with a broad view on the market and gradually work your way down until you reach your traded time frame. Looking at higher time frames first will provide context for market structure within your trading time frame.

There is no real limit as to how many time frames can be monitored or which specific ones to choose, but there are general guidelines that most traders follow. A good starting point is to use three different time frames: Long-term Medium-term Short-term First, you can draw up the main trend in addition to the strongest support and resistance zones on the long-term time frame.

Then, you can head over to the medium-term time frame and technically do the same exact thing. Of course, this time, locate smaller moves within the broader trend plus the medium-term support and resistance zones. Finally, you can find your entry and exit points on the short-term time frame.

First, we pick a relevant long-term time frame. Then we investigate if the price is trending and whether or not we can draw a trend line. There are modest corrections and well-defined highs that allow us to draw a nice trend line. Most charting platforms will allow you to do this. Once the minute trend line has been drawn, we move on to the 5-minute chart. This will be our medium-term time frame that we can draw up and adjust the thickness like before. As the last step, we repeat the process with the 1-minute time frame.

In this example all three time frames point in the same direction. So, how do we use this information? Was it useless to browse through all these different time frames? No, not at all. The line provides a projection for where future wave highs may occur. Choose atleast 2 -3 points of the higher lows below the price for an uptrend and then join them with a line.

Do the same for the downtrend but this time choose the price tops of the lower highs above the price. Join the points with the line. Trend lines work as supports and resistance on the forex market chart. The more times price retests on a trend line the stronger and valid it becomes. How to trade using trendlines in forex? You can trade using trendlines in forex in 2 ways; Trading breakouts on trendline.

In order to trade trend line breakouts, always wait for a candlestick to close below the trend line or above. For example, After drawing a trendline on a downtrend, wait for a bullish candlestick to close above the trendline after a break. Similarly do the same if you want to sell after a breakout of a trendline in an uptrend. Wait for a bearish candlestick to close below the trendline after the break. Trading a trendline bounce Like we said trend lines can be used to identify the direction of the entire trend.

As price continues to test the trend line, the stronger it gets. Therefore if price is in the uptrend and keeps on making higher lows on the trend line it signifies a strong uptrend and in so doing gives a buy signal.

On the other hand, if price is trending down and keeps making lower highs, it shows a significant strong downtrend therefore sell signals. If you are to trade bounces using trendlines in forex, First identify the trend direction using a larger time frame If it is an uptrend, draw an upward trend line connecting higher lows or higher swing lows Identify price retracements, that is wait for price to touch the trend line again. As price bounces back off the trend line, place a buy trade at the close of the candlestick that touches the trend line and closes above the trendline in the direction of the trend.

Place your stop loss pips below the low of that candlestick. Place your profit targets on previous significant lower swing highs that you see on the chart. You should do the same when trading in a downtrend. This time you will use the lower highs to draw a trend line.

Trading a breakout You can trade a trend line break out in two ways: Aggressive Entry Conservative Entry The Aggressive way to trade using Trendlines in Forex: With aggressive trading, you enter a trade as soon as the breaking candlestick gives a confirmation below the trend line for an uptrend.

Do the same, above the trend line for a downtrend. Entry is as soon as the candlestick closes below the trendline Conservative entry break out to trade using Trendlines in Forex For a conservative entry, after a breakout, first wait for a price retest. When price breaks the trendline, it may continue immediately or first hangs around the broken level. There fore conservative traders wait for the price to bounce back after the break and enter on the second confirmation of the break or bounce.

In this way, you can reduce risks of run overs or false breaks. Place your stop loss slightly above or below the trend line depending on your entry point. If prices retest the breakout level and continues the opposite direction, it becomes a false breakout. A false break on the upper trend line, shows that there were still some of the sellers in the market and so the downtrend is likely to continue.