How to use trend lines to manage your trades

by , 15 October 2015

If you have a crystal ball, making money from trading would be so easy.

In the absence of a crystal ball, you need to use other ways to try to determine what's going on with the markets.

One very useful way to manage your trades is to use trend lines.

Let's take a closer look…


Determine the long-term trend with trend lines


To show you how effective using trend lines can be with trading, we will use platinum. The price of platinum has fallen some 58% since March 2008.

Will the precious metal fall further or is the worst over?

There’s no doubt about it, platinum is in a downtrend. And unless it faces some resistance, it will most likely continue to drop.

Trading with the trend is the best idea, but that’s not always as easy as it seems. As you can see from the chart below, even though platinum is in a long-term downward trend, the price has edged higher…


Trend lines on platinum price chart


If you’d put a short trade on platinum, this isn’t good news. This uptick indicates significant buying. This means keeping a close eye on the main downtrend line, Frank Hemsley in Profit Watch explains.


What you can tell from trend lines


With trends, the longer one is in place, the harder it is to break. This means you should use long-term trend lines as part of managing your trades.

Depending on which way you’re trading, long or short, you can use trend lines to help you determine stop losses and when it’s time to exit trades.

Watch the long-term trend lines closely along with shorter-term ones.

So there you have it. How to use trend lines to manage your trades.

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