While you are trading in the Forex market, among the numerous things that you have to learn about, different analysis systems are the most crucial factor. As Forex trading is largely about inspecting the market behavior and different factors that determine the direction of the price movement. When a trader becomes an expert, trading becomes much easier for him and much more profitable. But, it will not happen overnight. Traders have to learn about every single part of the process.
Trend Lines and Channels
These are possibly the most typical kind of technical analysis and perhaps one of the most underexploited ones too. However, the most amazing thing about them is that if estimated and inspected rightly, they can be as precise as any other method.
Almost the same goes for channels. In this article, we will discuss these two types of trends, and learning about them can give an edge to a trader. So, follow along attentively.
Sadly, most investors don’t depict that lines and don’t even know how to draw them accurately to make them fit the market instead of any other way around.
In their most fundamental form, an uptrend or bull stroke is depicted along the base of easily distinctive support areas. This is also called an ascending stroke.
In a bearish market or a downtrend, the line is depicted along with the ceiling of easily perceivable resistance areas or peaks. This line is also called a descending thread.
How to Draw Different Lines?
To delineate a Forex trend line accurately, all a trader has to do is to locate two prime bottoms or tops and connect them. Before you move to the function of the trend lines, make sure you visit https://www.home.saxo/en-sg/products/etf and learn about the optimum trading condition. If you try to find the perfect trend lines by using a faulty trading platform, you are going to face big problems.
It is as simple as this. There are no other complicated procedures or eccentric ways of measurement.
Kinds of Trends
A trader will find the market following one of these three kinds of trends:
Bullish or Uptrend
The market generates higher lows here.
Lower highs will be observed in this trend.
The market will be ranging now.
Things to Remember
While depicting a line, a trader must be aware of some crucial facts. It always takes at least two bottoms or two tops to draw a standard line. But to confirm a trend, it will need three of them.
A steeper line is less reliable. The steeper it gets, the more likely it is going to break.
If you take the line theory one step further and draw parallel lines at the same angle as the downtrend and uptrend, you will have made a channel.
Trend channels are also known as price channels. Channels are an example of ideal analyses which can be deployed to extract reliable indication about the perf>The lower stroke refers to support and the upper one refers to resistance. So, both bottoms and tops of channels represent possible areas of resistance and support. Channels with positive slopes are bullish and those with negative slopes are bearish.
To make an ascending channel, an investor has to draw a parallel thread at the exact angle as the bullish movement and then drive the line to a location where it can connect with the latest peak. This connection should be made simultaneously while creating the line.
To make a descending channel, the investor has to draw a parallel thread at the exact angle as the bearish movement and sweep it to a location where it connects with the latest valley. This must be done at the exact time that they create the trending thread.
If the price hits the lower line, it shows a potential buying area and if it hits an upper one, it indicates a selling area.
All information is meant for informational purposes only. Bl4nkcode does not provide any investment, legal or financial advices. Readers should do their own research before investing funds in any company/service/organizations mentioned.