11/25/07

Couple of words about Forex trend lines

Trend lines main purpose is to identify a trend and confirm its validity until trend changes.

It is not difficult to see a trend without a trend line, but still Forex traders find it very useful to draw trend lines to analise Forex charts.

To draw a trend line they simply connect price bottoms in an uptrend and price tops in a downtrend. Traders need at least two bottoms/tops to touch a trend line in order to make it valid.

While a trend line stays intact, and by intact Forex traders mean that no price bar has managed to close on the other side of the trend line, the trend is not going to change.

The more time price comes and bounces off a trend line the stronger the trend line is.

Signal of a possible trend reversal comes only when a trend line gets broken.
And while traders prepare for a trend change usually it is not enough to rely only on a tend line signals itself. It is absolutely without a doubt a helpful tool, but other studies and/or indicators are needed to confirm trend changing signals received from a trend line breakout.

 
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