Forex Trend Lines

What is a Forex Trend Line?

Plotting a simple trend line on any Forex chart instantly helps "reading" the chart.

Not only does a trend line show the current trend direction, it also suggests levels of Support and Resistance for the current and future market price.

More so it helps finding good Entry and Exit points, e.g. best price levels for profit taking and placing protective stops.

This very simple, but yet quite powerful tool will be one of the crucial indicators of possible trend reversal = when market price starts move in the opposite direction.

Shall we learn how to draw trend line to help us find profitable trading opportunities?

How to Draw a Forex Trend Line?

In an uptrend market the trend line is drawn below the pattern formation; in the downtrend — above.

When the trend is about to change, the trend line will be crossed, signaling that the price is ready to move in the opposite direction.

In the uptrend, Forex trend line is drawn through the lowest swing-points of the price move.
Connecting at least two «lowest lows» will create a trend line.

In the down trend, trend line is drawn through the highest swing-points of the price move.
Connecting at least two «highest highs» will create a trend line.

Keep in mind that same charts may show slightly different "highs" and "lows" if you try to compare different Forex brokers. This can be explained by the fact Forex quotes often vary from broker to broker (it's a small difference, yet often clearly noticeable when it comes to drawing trend lines).

A trend line confirms its validity when the price respects this line. The more «lowest lows» / «highest highs» the trend line contains, the stronger it becomes.

Another sample of drawing trend lines: main and inner downtrend lines.

Learn more about Forex trend lines in the Trend Line Book — Free Forex eBook.

To your trading success!
Jeff Boyd