How To Draw Trendlines

Do you know how to draw trendlines? I bet you do not, that’s why you are here reading this…

Good!

In here you will learn how to draw trendlines and as  a forex trader, one of the skills you need to master is the ability to draw proper trendlines.



THE IMPORTANCE OF TRENDLINES IN FOREX TRADING AND WHY I USE THEM

For me, trendlines give me 4 things:

1. trend direction (uptrend or downtrend)
2. Potential Market Swing Points
3. Clarity without all the clutter of other forex indicators.

Now let me explain…

• With Trend direction, many forex traders would use moving averages to gauge trend direction. That’s one way to do it. The other way to do it is by drawing trendlines. As soon as the trendline is intercepted by price and broken, then I know the trend may changed.
• Trendlines are really good at picking market swing points with an uncanny ability. No other forex indicator would even come close to that.
• Just drawing a few trendlines on my charts is all I need to aware of where price is headed and if it comes close to any of my trendlines, I sit up and watch what happens. Trendlines keep my forex charts free of clutter. 

HOW TO DRAW UPWARD TRENDLINES

There are two main purposes for me for drawing upward trendlines:

1. To trade off the upward bounce of the upward trendline
2. and to tell me if price intersects that upward trendline, it is a potential signal for a downtrend so if I have trade positions are currently in profit, I should be probably thinking of bailing out!

Referring to the chart above…here are  3 simple steps for drawing upward trendlines.

1. Look for higher swing lows or call it “bottoms” of price if you may.
2. For a market in an uptrend (like the chart above), trendlines must be drawn below the price connecting a minimum of 2 bottoms of increasing height. You need a minimum of 2 bottoms to draw a trend line.
3. Make sure the bottoms are spaced apart nicely. If they are close together, it is generally not good to use. If they are too far apart, they would not be noticeable.

HOW TO DRAW A DOWNWARD TRENDLINE

1. Look for lower swing highs or call it “peaks” of price if you may.
2. For a downtrend market (like the chart below), trendlines must be drawn above the price connecting a minimum of 2 peaks of decreasing height. You need a minimum of 2 peaks to draw a trend line.
3. Make sure the peaks are spaced apart nicely. If they are close together, it is generally not good to use. If they are too far apart, they would not be noticeable.

So there you have it! This is how you draw trendlines on your forex charts.

ADVANTAGES OF TRENDING OFF TRENDLINES

Trendline Trading gives you the best in terms of high reward-low risk entries in any trading system you can find. In order to to that, you need to master the art of drawing proper trendlines. There’s no quick fix. Here’s the solution: practice makes perfect.

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