Patterns to draw how to#

The high degree of leverage can work against you as well as for you.

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A break and retest of a trend line that had three of more touches can often mean a reversal in the market and a potential buying or selling opportunityĭisclaimer: Any Advice or information on this website is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information.

The higher time frames will always produce the most reliable trend lines, so start there and work your way down.

Trend lines can help traders identify buying and selling opportunities that occur within a strong trend.

Think of trend lines as the diagonal equivalent to horizontal support and resistance levels.

We’ve covered a lot in this lesson, so let’s recap some of the important points.

Patterns to draw how to#

I hope this lesson has given you a better understanding of how to draw trend lines and how they can be used in the Forex market. So if a trend line doesn’t fit well, it’s probably best to move on to another pattern. The best trend lines are the most obvious ones. This brings me to the most important part about drawing trend lines, or any support or resistance level for that matter. We call this “curve fitting” and it happens when a technical trader is so convinced that a level should exit, that the trader begins to try to make the level fit the price action on the chart. This is perhaps the most common pitfall Forex traders make when drawing trend lines. If you find that a trend line cuts through the body of a candlestick, then the trend line is likely not valid. The most important part of any trend line is to get the most touches without the level cutting off part of a candlestick. What’s important here is that the weekly chart above never closed above this level. This doesn’t mean that the trend line is invalid. Notice how the trend line above does not perfectly line up with the highs of each candle, nor does it line up perfectly with the open or close of each candle. Here is a great example of a trend line that was drawn from the daily time frame. The longer a trend line is respected, the more important it becomes. A trend line that extends over two years will always be considered more important than a level that only extends the course of two weeks. This brings me to a very important rule regarding trend lines. One reason I prefer the daily time frame for drawing trend lines, besides the fact that I do most of my trading from this time frame, is that it represents an extended period of time. Just about everything I do in the Forex market begins on the daily time frame and drawing trend lines is no exception. Use the Higher Time Frames for Drawing Trend Lines Let’s take a look at each of these in greater detail. Never try to force a trend line to fit – if it doesn’t fit the chart then it isn’t valid and is therefore not worth having on your chart.Most trend lines you come across will have some overlap from the high or low of a candle, but what’s important is getting the most touches possible without cutting through the body of a candle.The higher time frames will always produce the most reliable trend lines, so start there and work your way down.There are three very important keys to drawing effective trend lines. 3 Keys to Drawing Trend Lines Effectively