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Trend lines are probably the most common form of technical analysis in forex trading.
They are probably one of the most underutilized ones as well.
If drawn correctly, they can be as accurate as any other method.
Unfortunately, most forex traders don’t draw them correctly or try to make the line fit the market instead of the other way around
In their most basic form, an uptrend line is drawn along the bottom of easily identifiable support areas (valleys).
In a downtrend, the trend line is drawn along the top of easily identifiable resistance areas (peaks).
There are three types of trends:
1.Uptrend (higher lows)
2.Downtrend (lower highs)
3.Sideways trends (ranging)
Support and resistance is one of the most widely used concepts in forex trading.
Strangely enough, everyone seems to have their own idea on how you should measure forex support and resistance.
Let’s take a look at the basics first.
Look at the diagram above. As you can see, this zigzag pattern is making its way up (bull market).
When the forex market moves up and then pulls back, the highest point reached before it pulled back is now resistance.
As the market continues up again, the lowest point reached before it started back is now support.
In this way, resistance and support are continually formed as the forex market oscillates over time. The reverse is true for the downtrend.