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…
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…
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…
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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