Forex Tutorial #1: The Power of Trend Lines

I love trend lines as they are able to show me important area of support and resistance. With a proper understanding of trend line and how to draw them properly, you will be able to use it in your trade.

First of all, let us take a look at how the market respect the trend lines

Example

Example

When the price is held by the trend line, you will see them being repelled by it and you can form a trading strategy out of it.

Let's say that you have drawn a conventional trend line and you see a price approaching it. If it is a strong trend line, the price will most probably be repelled by it and thus you can trade the repulsion.

Example of Price Approaching

Example of Profit

How to know whether I have a strong trend line?

A strong trend line is often connected by major swing highs and lows while a weaker trend line is connected by minor swing highs and lows. Below are some examples of major swing and minor swing.

Examples

Besides trading the swing when the price is repelled by the trend line, you can also trade the breakout of the trend line. Although the strong trend line is able to hold the price for sometime, there will still be times where the price will be able to break through it and this can also be one of the trading strategy.

Example

The key to trend line break trading lies in your ability to draw the right trend line and your ability to verify if it is a valid breakout. The problem with most traders when trading trend line break is fake out and their inability to draw the right trend line.

Examples of Fake Outs

 

 

 

 

 

 

 

 

 

 

 

In your next tutorial, I will go through with you something known as the medium and long term trend line and how you can make use of them to formulate a successful trading strategy.

So stay tune and good luck for your trading!