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Stick to these two rules for drawing trend lines to increase your chances of forex trading success

by , 22 October 2014

Trend lines are an integral part of any forex trading strategy. Trend lines form the basis of support and resistance lines.

To make sure you use trend lines to their full potential, you need to adhere to a couple of rules. Stick to these rules and you'll increase your chances of success.

So what are these rules for drawing trend lines?

Read on to find out…

Drawing trend lines rule #1: A trend line shouldn’t cut through other highs and lows

When drawing trend lines, you can’t have them cutting through other highs and lows. Have a look at the chart below…

Chart showing bad trend line

This isn’t a good trend line. As you can see it cuts through some of the currency pair’s lows.

So a good trend line needs to be above or below the price action. Never through it.

The next chart shows you a better trend line…

Chart showing good trend line

You can see this trend line remains below the price action. It only touches the lows of the upward price trend.

Drawing trend lines rule #2: How to use trend lines to increase the chances of a successful forex trade

When it comes to working out the key support and resistance levels, you’re best to opt for higher timeframes. In other words, even if you’re looking at an intraday chart, zoom out to a higher timeframe, for example a weekly timeframe.

You can then use these trend lines to tell you the overall direction of a currency pair, Max Munroe in Forex Round-Up explains.

Once you have these trend lines, you can add other trend lines to pinpoint key areas for price action signals.

Take a look at the following chart…

Chart showing trend lines

This chart has horizontal lines as well as a trend line that show the key support and resistance areas.

As well as the main overall downtrend, you can have smaller trends on the same chart.

The main thing to note about trend lines is they offer a whole host of opportunities. But you can dramatically increase your chances of forex trading success by trading with the overall trend.

You can also make profitable trades by finding turning points. These tend to occur at trend line support and resistance areas.

So there you have it. Why you should stick to these two rules for drawing trend lines to increase your chances of forex trading success.

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Stick to these two rules for drawing trend lines to increase your chances of forex trading success
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