Drawing Correct Trendlines
Learning currency trading is like building a new car from scratch without an instruction manual for new traders. Many of them acquire quality parts like brakes, wheels, motors, seats, steering wheels etc to build the car.
To become a successful trader you need right parts with right instructions to put them together. After all, a part such as a $2.00 gasket can bring your car to a screeching halt.
Understand that forex trading is very different from trading stocks. Companies can file for bankruptcies like Enron or GM or Goldman Sachs. Companies go completely out of business taking their share value to zero. However in case of currencies, there is no threat of a country going bankrupt. The only thing that can happen is a loan default by a poor country.
Trade balances and budget deficits play a role in determining the price of a currency. What can happen is that trade balances and foreign capital inflows can cause severe economic pressures on a currency! This can create dramatic changes between the currency values relative to other currencies. When that happens, it can be an incredible financial opportunity for savvy, educated currency traders.
You need to learn how to find the current trend before you enter the markets. For a skilled and educated trader, learning how to spot a trend that can last from a few hours, several days or several months can create an enormous financial return.
Fighting a trend is like swimming against the current and getting drowned. You should always trade in the direction of the market. Traders make many mistakes. The biggest one is trading in the wrong direction.
Suppose you are an active trader. You should have the trading software that has the moving trend line indicator. If not then, you will need to learn the skill of drawing correct Trendlines. An incorrectly drawn trendline can be the difference between making and losing money in a trade.
There are three types of trend lines that you need to learn how to draw. 1) An Inner Trendline. 2) An Outer Trendline. 3) A Long Term Trendline. These three trendlines form on all time frames and in both uptrends and downtrends and you will need them in your trading.
In any uptrend draw a straight line connecting levels of support without penetrating bodies or wicks of a candle. Correctly drawn trendlines can project future levels of potential support in an uptrend and future levels of resistance in a downtrend.
You find and draw inner uptrendlines by finding the last two levels of support and drawing the line from left to right. Similarly draw the outer uptrend line by starting at the far left of the chart and moving to the right connecting the majority of the support levels with a straight line.
Draw the outer term trendline by going on a larger time frame and connect the levels of support starting from the far left of the chart moving forward. In a downtrend, the market reacts the same way as an uptrend but in an opposite direction. That means all the rules are the same but in the opposite direction. Instead of a support level, use the resistance level to draw trendlines in a downtrend. - 23305
To become a successful trader you need right parts with right instructions to put them together. After all, a part such as a $2.00 gasket can bring your car to a screeching halt.
Understand that forex trading is very different from trading stocks. Companies can file for bankruptcies like Enron or GM or Goldman Sachs. Companies go completely out of business taking their share value to zero. However in case of currencies, there is no threat of a country going bankrupt. The only thing that can happen is a loan default by a poor country.
Trade balances and budget deficits play a role in determining the price of a currency. What can happen is that trade balances and foreign capital inflows can cause severe economic pressures on a currency! This can create dramatic changes between the currency values relative to other currencies. When that happens, it can be an incredible financial opportunity for savvy, educated currency traders.
You need to learn how to find the current trend before you enter the markets. For a skilled and educated trader, learning how to spot a trend that can last from a few hours, several days or several months can create an enormous financial return.
Fighting a trend is like swimming against the current and getting drowned. You should always trade in the direction of the market. Traders make many mistakes. The biggest one is trading in the wrong direction.
Suppose you are an active trader. You should have the trading software that has the moving trend line indicator. If not then, you will need to learn the skill of drawing correct Trendlines. An incorrectly drawn trendline can be the difference between making and losing money in a trade.
There are three types of trend lines that you need to learn how to draw. 1) An Inner Trendline. 2) An Outer Trendline. 3) A Long Term Trendline. These three trendlines form on all time frames and in both uptrends and downtrends and you will need them in your trading.
In any uptrend draw a straight line connecting levels of support without penetrating bodies or wicks of a candle. Correctly drawn trendlines can project future levels of potential support in an uptrend and future levels of resistance in a downtrend.
You find and draw inner uptrendlines by finding the last two levels of support and drawing the line from left to right. Similarly draw the outer uptrend line by starting at the far left of the chart and moving to the right connecting the majority of the support levels with a straight line.
Draw the outer term trendline by going on a larger time frame and connect the levels of support starting from the far left of the chart moving forward. In a downtrend, the market reacts the same way as an uptrend but in an opposite direction. That means all the rules are the same but in the opposite direction. Instead of a support level, use the resistance level to draw trendlines in a downtrend. - 23305
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading and swing trading stocks and currencies. Discover A Revolutionary New Forex Robot. Develop your own Forex Trading System.
posted by Mr. Forex at
5:50 AM
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