Trendline analysis is the method of analysing the trend in forex charts. Trendline analysis is one of the most powerful analytic tools you will ever learn in Forex. To draw a trendline simply connect two consecutive tops of bottoms in a price swing. The line that is extended should limit the price movement as support or resistance. In an uptrend you draw a resistance line connecting two consecutive tops and in a downtrend you draw a support line connecting two consecutive bottoms. When a resistance or support line is broken it is usually retested. This gives an entry trade point. You could draw many trendlines in many time frames. The bigger the time frame the most reliable a trendline is.

The most reliable trendlines are in a daily time frame or more. The lower the time frame the more easy is for the price to break the trendline without much resistance. Always look at the higher time frame before trading. Look at the bigger picture recognize the trend and apply extra caution when you decide to enter the market counter the trend.

Watch the videos below to visualize the use of trendlines.

This entry was posted on Wednesday, March 14th, 2007 at 8:15 am and is filed under Forex Trendline Analysis. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.