Anticipate the prices move and make profitable forex trades with trend lines

Trend line is one of the most popular and highly recommended ways on how to plot support and resistance. Unfortunately, the majority of forex traders do not understand how to make the most of trend lines as it should be, thus fail to use this valuable kind of forex trading technical analysis.

If you draw the trend lines are accurately, you can match the market with the lines rather than the opposite way which is a mistake generally made by the forex traders. It is important to plot the support and resistance correctly, for the reason that it can give you the source to identify gain and loss points so that you can make the profitable trades while minimize the risks.

The forex traders should draw the trend lines in order to give them a thought of how the market trend momentum is, since the price moves high or low or also called as channels allow you to anticipate to which direction the price will move. So, when the price is showing an up ward trend, you plot an up trend line. Then, if the price drastically breaks below the trend line, that means a break out take place, the current trend will shift, and you might see a turnaround.

Turnaround means that if previously it was an up ward trend, then the price going low and breached the trend line, it signifies a down ward trend is newly to take place. And if previously it was a down ward trend, then the price going high and breached the trend line, it signifies an up ward trend is newly to take place when you use the trend lines analysis.

There are three kinds of trend lines that you can use in your forex trading strategy.

The first one is short term trend lines. You draw lines through the two current low points for an up ward trend or the two current high points for a down ward trend. To spot these current low and high points, it is best to see within a shorter period of time like 15 minutes or 30 minutes chart.

However, if you become aware of returning price on the longer period of time chart that over 30 minutes, then you should observe for other aspects and do more analysis such as you should draw horizontal lines to be a sign of the main support and resistance by referring to the former peaks and dips, draw Fibonacci retracement and expansion levels. You also can work out the pivot points on a daily basis and take the 200 EMA or Exponential Moving Average and place them onto your charts.

Then you observe whether the prices were to rebound or tap the trend lines on the average or longer period of time charts which is more than 60 minutes chart and also whether the prices agree or match with one of the analysis that you do as the above.

The second kind of trend lines is medium term. This kind works best in a longer period of time like on a 60 minutes chart. Once more relate the most recent lowest low to present action of the price to the former lowest low during an up ward movement trend. Otherwise, the most recent highest high to present action of the price to the former highest high during a down ward movement trend.

The final kind of trend lines is long term. By using the same approaches explained for medium term trend lines, you draw long term trend lines which based on longer period of time like a 4 hours chart or a 1 day chart.

When you draw a trend line on a one day chart you can prepare yourself with details such as where the price is, and to which directly the price is most likely to move, whether it will rebound and go back over, or else go on with the present momentum.

In search of such chances require patience as they do not come over and over again. When they come you are almost assured with again and make money with a winning trade, however, only if you place your first take profit target at the practical point.

If you trade in various lots, you should make sure that you place your first take profit target point at the 10 to 20 pips level while allow one or two lots keep on going if the price carries on moving to your predicted direction. And also simultaneously, you should raise your stop loss point at the break even level upon taking your first gain in order to make sure your trades go on safely and without a risk.

You can utilize trend lines as a powerful technical indicator and as an analysis for your forex trading strategy but with prudence and carefulness. It is not wise to fill up your graphs with each and every trend line you can come up with as it can only lead to confusion and fuzzy analysis.

On the other hand, with one or two trend lines together with the price main points such as high and low points can provide you with useful information of the action of price and when you combine them with other forex trading technical indicators can lead you to winning trades.