Trend lines are drawn on charts to help predict the general direction of price. They also help you to see reversals. On the chart below the green line is a trend line. Trend lines also help to determine good entry and exit points, and help you decide where to put your stops. They should be called magic lines, right? However, they make a great addition to your trading arsenal.
The main problem with trend lines is placing them on your chart. It can be a little intimidating to start with but it is quite easy to get the hang of it. In this section, you will learn how to place trend lines on your chart, and use them to make pips! There are two main types of trend lines: A bullish trend line has a positive slope and is formed by connecting two or more low points.
The second swing low must be higher than the first swing low. Check out the example below. A bearish trend line is formed by connecting two or more high points. The second swing high must be lower than the first swing high. There you have it! Now your chart has trend lines! But wait one minute newbie. Once a trend line is placed and it has had a third bounce it becomes active.
Now the price should find support or resistance at the trend line. It should have trouble breaking the line. If the price does break the line it usually means the trend is over.
Also, the longer a trend line is active the stronger it gets. What Are Trend Lines? Placing Trend Lines There are two main types of trend lines: So placing lines is pretty easy. All you need to do is:More...