n this post, I will show you how to draw trend lines the right way in 2 simple steps. Knowing how to draw trend lines is one important skill you need to learn as a forex trader because trendlines are important for identifying support and resistance levels.
What Is A Trend Line?
A trend line is simply a line that many forex traders use as part of their technical analysis. It is a line drawn along a trend to show support or resistance.
Here are the main characteristics of a trend line:
- A trend line can never be a horizontal line, it must be always be diagonal line.
- there are only two types of trend lines, a falling trend line and a rising trend line.
- a falling trend line shows that the market is in a down trend and a break of it can mean that the market is now in changing to an up trend.
- a rising trend line shows that the market is in an up trend and if price breaks it, it can mean that the market is now in down trend.
How To Draw A Falling Trend Line in A Down Trend
A falling trend line shows you that the market is in a down trend. A falling trend line is drawn above price.
If price heads up to the falling trend line, that line can act as zone or level of resistance for price and you can see price hit that falling trend line and move back down.
Here are the steps to draw a falling trend line in a down trend:
Step 1: Find two swing highs (peaks), these are shown as point 1 and 2 on the chart below.
Step 2: Connect point 1 and point 2 with a line
That’s it…you have a falling trend line!