{"id":93034,"date":"2016-07-24T07:09:17","date_gmt":"2016-07-24T11:09:17","guid":{"rendered":"http:\/\/countingpips.com\/?p=93034"},"modified":"2016-07-18T07:09:35","modified_gmt":"2016-07-18T11:09:35","slug":"how-drawing-trend-lines-help-traders-of-all-experience-levels-part-1","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/07\/how-drawing-trend-lines-help-traders-of-all-experience-levels-part-1\/","title":{"rendered":"How drawing trend lines help traders of all experience levels, part 1"},"content":{"rendered":"
July 24, 2016<\/div>
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By Admiral Markets<\/b><\/p>\n

\"trend<\/p>\n

Dear Traders,<\/p>\n

Many of you wonder whether it’s worth the effort and time to learn how to draw trend lines on charts.<\/p>\n

Starting traders often believe that using trend lines is exclusively a practice for traders with years or even decades of experience<\/u><\/a>.<\/p>\n

Some beginners even hesitate to use automatic solutions – like True Trendline indicator for MetaTrader 4<\/u><\/a>.<\/p>\n

But here’s the good news.<\/p>

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Traders of all<\/em> experience levels can benefit from trend lines – even traders who only recently started trading<\/u><\/a>.<\/p>\n

Furthermore, most seasoned traders agree that drawing trend lines helps boost their trading level.<\/p>\n

So, here is our agenda for this article:<\/p>\n

…I will not only explain why <\/em>trend lines are so powerful\u2026<\/p>\n

…but also share the details on how to draw trend lines to achieve the maximum benefit.<\/p>\n

\"Admiral<\/a><\/p>\n

Trend lines are not the only trending tools<\/h2>\n

Let’s be clear – drawing trend lines is an old-school technique.<\/p>\n

Then how will your trading benefit from trend lines?<\/p>\n

At the very least, drawing trend lines can give you the following five advantages:<\/p>\n

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  1. identification of a trend – the ability to connect tops and\/or bottoms and see bigger moves<\/li>\n
  2. making chart patterns – a simple method to mark consolidations and market pauses<\/li>\n
  3. spotting divergence – a practice to measure momentum between various highs and lows<\/li>\n
  4. marking breakouts – a rough price zone to see whether price can break support or resistance<\/li>\n
  5. recognising bounces – a rough price zone to see a failure to break.<\/li>\n<\/ol>\n

    There is one drawback, however.<\/p>\n

    You have to manually draw trend lines – it takes time and can lead to errors.<\/p>\n

    Fortunately, the pros far outweigh the cons.<\/p>\n

    The art and science of trend line drawing<\/h2>\n

    Drawing trend lines is a paradox – it is both art and science at the same time.<\/p>\n

    Want to know why?<\/p>\n

    Guidelines can be applied to trend line drawing (the science part)…<\/p>\n

    …but each trader will interpret price movements in their own way and draw trend lines with noticeable differences (the art part).<\/p>\n

    Ultimately, a trend line is an intuitive tool – as long as you keep in mind the following:<\/p>\n

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    1. connecting two support or resistance spots offers a potential trend line<\/li>\n
    2. connecting at least three support or resistance spots displays real support or resistance<\/li>\n<\/ol>\n

      \"trend<\/p>\n

      There are other important guidelines to keep in mind if you want to draw technically good lines.<\/p>\n

      How to draw useful trend lines<\/h2>\n

      Though no two trend lines are exactly the same, good trend lines do share common characteristics.<\/p>\n

      Let’s review the most important of them.<\/p>\n

      Shallow trend lines<\/h3>\n

      Shallow-angled trend lines mark the boundaries of a corrective chart pattern.<\/p>\n

      Chart patterns are an integral part of comprehensive chart analysis.<\/p>\n

      They help traders understand the market psychology<\/u> <\/a>of the moment:<\/p>\n

      …a rising or falling wedge shows that the trend is in trouble and could end soon\u2026<\/p>\n

      \"trend<\/p>\n

      …a bear flag or bull flag is often a confirmation that trend will continue\u2026<\/p>\n

      \"Trend<\/p>\n

      …and a head and shoulders pattern often indicates the end of a trend.<\/p>\n

      \"Trend<\/p>\n

      Break of the support and resistance levels offers important information:<\/p>\n

      …either the pattern is confirmed and the trend continues\u2026<\/p>\n

      …or the pattern fails and the trend stops.<\/p>\n

      Here are some of the patterns to keep in mind:<\/p>\n

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      1. rising wedge – break of support confirms reversal and break of resistance invalidates reversal<\/li>\n
      2. falling wedge – break of resistance confirms reversal and break of support invalidates reversal<\/li>\n
      3. bear flag – break of support confirms trend continuation and break of resistance invalidates continuation<\/li>\n
      4. bull flag – break of resistance confirms trend continuation and break of support invalidates continuation<\/li>\n
      5. head and shoulders – break of support confirms reversal<\/li>\n
      6. inverted head and shoulders – break of resistance confirms reversal<\/li>\n<\/ol>\n

        The list doesn’t quite stop here – there are a lot more patterns available.<\/p>\n

        A contracting triangle shows indecision and often breaks in the same direction as the previous impulse.<\/p>\n

        A double or triple bottom confirms that trend failed to continue.<\/p>\n

        I’ll stop here, but if you want to know more – watch our video below for an overview of chart patterns.<\/p>\n