What is a trend line?
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  • #16 Collapse

    DEFINITION

    What is a trend line?

    Trend line is a trading tool used for drawing diagonal lines to identify the market condition and where the current price is in respect to the trend line and also to watch out for momentum.

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    By the definition alone you already have a gist of why it is good for trading and of them is a trend line is essentially a support and resistance drawn in a diagonal manner instead of a horizontal line. As the trend starts to take form you will see a trend line also start to form so you will understand the context of what the market is doing. This is why a trend line is important and so is support and resistance because they both work in tandem, where one market situation can’t be captured perfectly by the support and resistance you have in the trend line. Anything that can’t be captured by a trend line will be captured by support and resistance. If the market falls out of both of them then it’s a situation that you don’t want to be in because most likely it’s a bad market scenario.


    HOW TO DRAW A TREND LINE?

    A trend line is a tool and unlike an indicator where you can just set up the parameter you must draw the trend line on your own and if you do it wrong then your chance to make money disappear.


    Steps to draw a trend line.

    If you want your trend line to be significant you should at least start drawing it on a daily time frame because this is the minimum time frame that the big money is willing to watch. For retail traders, you can still use the H4 time frame and this is still relevant and wiped off many false signals too. So, if you want to trade using the H4 time frame then you should draw your trend line at least on the daily time frame or the weekly time frame.

    When drawing a trend line you should also pay attention to the amount of history that you will use. Zoom out until you have at least 6 months of data on the daily time frame candles. If you use only a small sample of data there is a chance you are losing the big picture. You need to have a balance of relevancy and enough historical data and 6 months of daily candles is just about enough. The display used by a trader might be different because some traders will use big monitors while others use laptops and some traders like me only use small gadgets for trading (as you can always find in my trading journal EnKubo 8x5’s trading journal in this forum). That is why I came to a conclusive number of 6 months of daily time frame candles to be enough as your basis before you start drawing your trend line.

    A trend line can only be drawn when there are at least 2 points to connect from high to lower high or from low to higher low. This is the basic thing to do when you want to draw a correct trend line. When you do this, make sure you only connect the obvious extreme points and not just some lower highs or higher lows. Also, don’t be too strict when drawing so you don’t get trapped with only connecting only the high price to high price or low price to low price. You can touch the body of the wick or even the candle body as long as you can have as many touches on the trend line. This is important.

    One tip on how to draw a trend line properly is, contrary to the common knowledge among the traders, the fastest way to draw a trend line is actually to draw it from right to left not from left to right. Start from the end and try to get as many touches to the trend line as possible. This way you won’t have to adjust your trend line a couple of times to get the right drawing.

    When you finish drawing the initial trend line you can add another line above it and if you use a laptop or computer then you can just copy and paste the initial line and then put it on the extreme so now you will have a true trend line zone instead of just a single line. You should always think of a trend line (and also support and resistance) as a zone instead of a line.


    USING THE TREND LINE

    There are different ways to use the trend line depending on the market situation at the moment.

    Trade the bounce off the trend line. The idea of this strategy is very simple because all you have to do is to catch the movement of the market as the price bounces off of the trend line. The safe play for this tactic is to go only in the direction of the trend so if the trend is up then you should only take the bounce up and just ignore the bounces from the upper trend line. Taking counter-trend trades are very risky and especially if you don’t yet have enough experience using the trend line.

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    Trade the break of the trend line. The way to catch a breakout trade from a trend line is by waiting for a build up before the breakout or after the breakout. A build up could be a small pattern like a triangle or a rectangle or any other pattern but the size is mini. This is to make your stop loss smaller because to trade a breakout from a trend line you need to have a logical place to put your stop loss to achieve efficiency in terms of potential reward. Another way to break out of a trend line is by entering after a re-test because you will sometimes get this kind of scenario and it’s a good situation if there is one.

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    PUTTING TARGETS

    Where to put stop loss?

    Your stop loss will directly affect your reward potential so if you put it too far from your entry then you will get a hard time to make the target profit (in R multiple) because you need the market to move far enough in your favor for you to just achieve 1:1 RR. So how do you put your stop loss? If your stop loss is too big then you can just use 50% of the size and put your new stop loss there. This already effectively puts you in a better position and you can get your profit potential quicker. Another thing you can do is to divide your position into 2 and put half at full size stop loss and the other half at 50% the size. For the first position you will have the safety that it won’t get stopped too quickly but the potential reward is not much and on the second position you take more risk but you have the potential to make better rewards.


    Your take profit level

    These days, using multiple of R is a good idea because it is simple and it can provide you with more stable gains. 1:2 is a good start for setting TP but 1:3 is much better. However, you can try out your own take profit setting as you see fit. You can find a lot of articles about it on this forum.
    You only need to read THIS ARTICLE to make money from forex trading,

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    • #17 Collapse

      What is a trend line?
      Lines A trend line is a straight line that can connect a valley point (bottom) that goes up sequentially in an uptrend, as well as a top point that goes down sequentially in a downtrend. To create a trend line, it is necessary to have at least two price points connected and here are three main characteristics of a trend line:

      • The more the price points are connected, the more valid and stronger the trend line has been to hold the support and resistance points in the next test.
      • The more valid a trend line is, the more it will be noticed and obeyed by market participants.
      • The steep level of the trend line can be used as a reference to identify market conditions that are bullish (if steep is upward) or bearish (if steep is downward).


      The following is an overview of trend lines on uptrend and downtrend price movements that are connected from three support and resistance points.

      Tips for making uptrend line

      To create a trend line a trader must connect a minimum of two price points that are close to each other. Then draw a line to find out the point of support (in an uptrend) or point of resistance (in a downtrend) in the future.


      Tips for making downtrend line
      For about creating an uptrend line, the following needs to be done for the initial steps: Firstdetermine the lowest price point (low level) and draw the line to the next lowest price point. Next, extend the line that has been mentioned to anticipate support and resistance points.

      Then, the anticipation step in the third stage is the most important thing in making a trend line. Here's an example of making an uptrend line in the EUR / JPY pair on the Daily chart and the description of the image above.
      • At the lowest price point to start and at this point, the price movement started moving upwards.
      • At the next lowest price point, try to adjust the slope of the trend line until it touches the lowest price level on the candlestick bar.
      • Then extend the uptrend line to the right to make it through several lowest price points for each candlestick bar.
      • Try to adjust the slope of the uptrend line to help identify support points.
      • While the uptrend line does not need to be right at the lowest price point, it can be adjusted as long as it doesn't deviate too far.
      • For the first low price point, it should not be changed since it is the initial reference point at the start of the uptrend line.
      • Next, extend the uptrend line to the 0right to anticipate the next support point.


      Tips for Making a downtrend Line
      With a precise method like how to create a previous trend line, for bearish market conditions a downtrend line can be made that anticipates future resistance points. And an example this time, for example, making a downtrend line in the USD / CAD pair on the Daily chart and the picture above.
      • At the highest price point to start and at this point the price movement starts moving downwards.
      • Whereas at the next highest price point, try to adjust the slope of the trend line until it touches the highest price level on the candlestick bar.
      • Then extend the downtrend line to the right to make some of the highest price points for each candlestick bar.
      • Next, try to adjust the slope of the downtrend line to help identify resistance points.
      • For the downtrend line, it doesn't need to be right at the highest price point, but it can be adjusted as long as it doesn't deviate too far.
      • At the first high price point, it should not be necessary to change this since it is the initial reference point at the start of the downtrend line.
      • Then extend the downtrend line to the right in anticipation of future resistance price points.
      Tacaz Trading Journal

      Nothing is true everything is permitted!

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      • #18 Collapse

        Hy friends good morning
        Topic: Trend line
        Trend line is also act as diagonal support and resistance. At least more than two point in the needed to draw the trend line. Three points are most reliable trendline. Higher time frame will always give most reliable trend lines. Lower degree trend lines are indicating the trend is close to the reversal. A trendline is a straight line that connets two or more price points and then extends into the future to act as a line of support or resistance an uptrend line has a positive slope. A downtrend line has a negative slope. A trendline is only confirmed if you can get three points of contect because you can always connect any two random points on your charts. But when three points of contact are lining up it is no coincidence anymore.
        Just like most other technical tools trendlines return better results when applied to and traded on higher time frames large number of market participants follow trendlines and other technical levels on longer term chart which increases their importance as well. Shorter term chart include mostly market noise that is very difficult to trade and track. Even if you are shorter term trader such as a day trader your trading performance can increase significantly if you apply trendlines to longer term charts and zoom into shorter trem charts to find entry and exit points. Trendline work quite similar to horizontal support and resistance level. A trendline acts as a support for the price when applied to consecutive higher lows in an uptrend and as a resistance when applied to consecutive lower highs in a downtrend. Once a rising trendline is broken that trendline becomes a resistance for the price. Similarly once a falling trendline is broken that trendline becomes a support for the price. Trade who missed the initial breakout could wait fot the pullback to enter with a short position. A stop loss order could be placed just above the trendline or the recent swing high.

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        • #19 Collapse

          Originally posted by usama97 View Post
          Hy friends good morning
          Topic: Trend line
          Trend line is also act as diagonal support and resistance. At least more than two point in the needed to draw the trend line. Three points are most reliable trendline. Higher time frame will always give most reliable trend lines. Lower degree trend lines are indicating the trend is close to the reversal. A trendline is a straight line that connets two or more price points and then extends into the future to act as a line of support or resistance an uptrend line has a positive slope. A downtrend line has a negative slope. A trendline is only confirmed if you can get three points of contect because you can always connect any two random points on your charts. But when three points of contact are lining up it is no coincidence anymore.
          Just like most other technical tools trendlines return better results when applied to and traded on higher time frames large number of market participants follow trendlines and other technical levels on longer term chart which increases their importance as well. Shorter term chart include mostly market noise that is very difficult to trade and track. Even if you are shorter term trader such as a day trader your trading performance can increase significantly if you apply trendlines to longer term charts and zoom into shorter trem charts to find entry and exit points. Trendline work quite similar to horizontal support and resistance level. A trendline acts as a support for the price when applied to consecutive higher lows in an uptrend and as a resistance when applied to consecutive lower highs in a downtrend. Once a rising trendline is broken that trendline becomes a resistance for the price. Similarly once a falling trendline is broken that trendline becomes a support for the price. Trade who missed the initial breakout could wait fot the pullback to enter with a short position. A stop loss order could be placed just above the trendline or the recent swing high.

          TREND LINE

          Trendlines are very helpful in technical analysis, but unfortunately only a few traders use this tool. Even if used correctly, Trendline has pretty good accuracy in its role of providing future price forecasts. Not a few traders are still careless in using it so they assume that the use of Trendline is less important, especially novice traders who are new to forex trading. Trendline is a tool that is very commonly used in technical analysis. In fact, its role is very important because the best trading strategy is a way of trading that follows the trend of price movements. If we can draw the trend line correctly, it can be as accurate as any other trading method.

          As long as it is depicted correctly, trendlines in forex can provide traders with signals as accurate as technical indicators. In addition, fundamental analysis users can use it to understand price trends in the long term. Therefore, the following knowledge of how to draw a trendline in forex must be mastered by every trader.

          A trendline is a line drawn above a pivot highs or below a pivot axis to indicate the direction of the prevailing price. Trend lines can be said to be a visual representation of support and resistance within a certain time frame. This line shows the direction and speed of the price and describes a pattern during periods of price contraction.

          Some important things that we should pay attention to when we are trying to draw a trendline:

          1. In drawing a trendline, there must be at least 2 peaks (highs) or 2 valleys (lows) which also act as Support and Resistance. If less than two, the trendline created is invalid.

          2. The steeper / steeper the slope of the trendline, the easier it will be to break. That's why drawing a trendline should be done on a large time frame, namely H4 and above.

          3. To draw an Upper Trendline, the method is to draw a line from Resistance to the next Resistance. It takes a minimum of two Resistance to draw this trend line. However, the more resistance points that form a trendline, the stronger the trendline will be.

          4. As for making a Lower Trendline, the way is to draw a line from Support to the next Support. A minimum of two supports is required to draw this trend line. However, the more support points that form a trendline, the stronger the trendline is.

          5. Don't force the trendline to be a certain perfect shape or according to your own will. If it turns out that it is difficult to draw a certain trend line, it may not be possible to draw it at that time because, for example, market conditions are uncertain.

          6. Like the Support & Resistance lines, the more often the trendline area is tested by the price, the stronger the influence will be. Also keep in mind that trendlines are not perfect trading tools. There will always be drawbacks so it is better if we combine it with other trading tools so that the signal generated is more accurate.

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          • #20 Collapse

            What is the Trend Line.?

            Introduction:
            It is a line drawn over the X-axis and Y-axis to show the prevailing direction of price. It represents support and resistance in any time frame. They show direction and speed of price. It is used commonly by trading deeply seek to ensure that the underlying trend of an asset is working in favor of their position. It can help to determine the price of a given commodity according to the trend.

            Explanation:
            A simple trend line is a very important and powerful essential tool in identifying the direction of the market players. It is helpful when the data analyzed by the traders they can forecast future values based upon their current data. It is a straight line that represents the data on a scatter plot. Trend lines work in forex trading. It remarkable accurate and most useful ways to find identify entry and exit levels. It is easily identified. It is a simple term that shows where supply and demand exist. Market analysis of the trend of a customer. It is widely popular use to spot potential tops and bottoms in a market.

            The best tool for traders:
            It is an excellent tool for traders. If they are used correctly. It directly affects the price. When the price falls the swing high falls. It is also be drawn along the swing lows some times in the market many trend lines can be drawn. All lines showing the price movement over various periods of time. During the uptrend. The uptrend and downtrend may occur in a market.

            Percentage calculation:
            Trend percentages are calculated as the current year divided by the base year (2006). For example, the net sales 2010 trend percentage of 146 percent equals $35,119 (net sales for 2010) divided by $24,08.Trend analysis calculates the percentage change for one account over a period of time of two years or more. Divide the change by the earlier year's balance. The result is the percentage change.
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