Trend Lines in Forex Technical Analysis
Trend lines are perhaps the most commonly used patterns in technical analysis. At the same time, they are also likely one of the most underutilized tools among various analytical methods.
If drawn correctly, their accuracy can rival that of any other technique. Unfortunately, most forex traders do not draw trend lines properly or try to force them to fit the market movement.
How to Draw Trend Lines in Forex Charts?
To draw a proper trend line, all you need to do is identify two major highs or lows and connect them with a straight line.
What’s next? Nothing. That’s it? Yes, it’s that simple!
Types of Trend Lines
There are three types of trend lines:
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Uptrend Line (Higher Lows)
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Downtrend Line (Lower Highs)
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Sideways Trend Line (Range-bound Movement)
Key Points to Remember About Trend Lines:
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At least two tops or bottoms are needed to draw a valid trend line, but a third point is required to confirm its validity.
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The steeper the trend line, the less reliable it is, and the more likely it is to be broken.
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Like horizontal support and resistance levels, the more a trend line is tested, the stronger its role as support or resistance becomes.
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Most importantly, never force a trend line to fit the market. If it doesn’t align with the actual price movement, the trend line is invalid.
