We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
GBP/USD
Bullish
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.57%, while traders in France 40 are at opposite extremes with 84.00%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/lCP80FZFD8
  • Commodities Update: As of 08:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 0.14% Gold: -0.53% Silver: -0.78% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/EGNbk1OlkQ
  • RT @TradeFloorAudio: UK Bookmaker Paddy Power cuts the odds of a Conservative Party majority at upcoming #GE2019 from 4/7 to 4/9 .... It ha…
  • Forex Update: As of 08:00, these are your best and worst performers based on the London trading schedule: 🇬🇧GBP: 0.41% 🇳🇿NZD: 0.12% 🇪🇺EUR: 0.09% 🇨🇭CHF: -0.02% 🇦🇺AUD: -0.02% 🇯🇵JPY: -0.17% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/0Z5fYqqkex
  • LIVE NOW: Join Market Analyst @DavidCottleFX for a look ahead at the major economic data which will drive Asia Pacific markets in the coming seven days. Register here: https://www.dailyfx.com/webinars/985612483?CHID=9&QPID=917720
  • Indices Update: As of 08:00, these are your best and worst performers based on the London trading schedule: Wall Street: 0.19% US 500: 0.17% Germany 30: 0.11% France 40: 0.07% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/GLPREk9GG5
  • Why financial market traders must monitor both monetary and fiscal policy?Find out from @MartinSEssex here: https://t.co/Fkzk88Y5gm https://t.co/BCtPSUCBO9
  • LIVE IN 30 MIN: Join Market Analyst @DavidCottleFX for a look ahead at the major economic data which will drive Asia Pacific markets in the coming seven days. Register here: https://www.dailyfx.com/webinars/985612483?CHID=9&QPID=917720
  • European Opening Calls From IG: #FTSE 7302 -0.02% #DAX 13229 -0.10% #CAC 5936 -0.06% #AEX 599 +0.03% #MIB 23521 -0.29% #IBEX 9248 -0.14% #STOXX 3708 -0.09%
  • 🇨🇳 CNY Foreign Direct Investment (YoY) (OCT), Actual: 7.4% Expected: N/A Previous: 3.8% https://www.dailyfx.com/economic-calendar#2019-11-18
Learn Forex: How to Trade Trendlines

Learn Forex: How to Trade Trendlines

2012-11-19 19:00:00
Walker England, Trading Instructor,
Share:

Support and resistance levels are considered one of the most used technical tools in the Forex market. These charting points can be used to find out which direction to trade, time entries, as well as to establish position exits. More often than not these convenient levels are found through drawing lines inside of our graphing software, so today we are going to focus on drawing trendlines on the chart.

When you begin drawing trendlines it is important to remember that not every trader will draw their line the same. Where you draw your lines may not be exactly where I place mine. This is ok as long as we remember the key rule that trendlines must connect at least two common points on our chart. Let’s take a look at a few examples.

Learn Forex: How to Trade Trendlines

Above we can see our first example using a weekly chart of the NAS100 (Nasdaq). The NAS 100 is considered in an uptrend as it has moved 1832 points higher over the course of the last 42 months. Our first trend line is drawn by connecting a series of ascending low points on our graph, which are circled in green. This line is acting as support since price is expected to act as a floor in this scenario, with price holding at these levels.

Once this trendline is drawn, traders will look to take advantage of new higher highs by creating buy orders. The optimal time to take new long positions in an uptrend occurs when price trades down to support and bounces. Once prices has touched support but not closed below it, traders may look to establish new buy entries. When trading an uptrend, traders can also limit risk by establishing stop losses underneath support.

Learn Forex: How to Trade Trendlines

In our next example above we can see an 8Hour chart of the EURAUD declining in a downtrend. Notice how the resistance trendline is formed by connecting the highs on our graph marked in green. On this chart, prices have recently touched the resistance line for the 4th time. It is important to note that the more times a trendline is tested without breaking, the weaker it becomes. Due to this, trend traders normally prefer to trade trendlines on either the third or fourth test.

Since our trendline is pointed down and price is moving lower, we should consider the EURAUD in a strong downtrend. Trend traders can use this information to trade market swings by looking to sell new positions when price moves back up to resistance. Traders should look for prices to touch resistance but not close above it. When price begins moving back in the direction of the trend, we have a valid sell signal. In this scenario stop losses may be placed above support.

Next: Here's How to Validate and Trade a Channel (30 of 47)

Previous: Introduction to Price Action & Trendlines

---Written by Walker England, Trading Instructor

To contact Walker, email instructor@dailyfx.com. Follow me on Twitter at @WEnglandFX.

To be added to Walker’s e-mail distribution list, send an email with the subject line “Distribution List” to instructor@dailyfx.com.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.