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.
You need right parts with right instructions to put them together in order to become a successful trader. After all, your car can come to a screeching halt due to a part such as a $2.00 gasket.
You should understand that forex trading is very different from trading stocks. Companies can file for bankruptcies like GM or Goldman Sachs or Enron. Companies can go completely out of business taking their share value to zero in the stock markets. However in case of currencies, there is no threat of a country going bankrupt or doing out of existence in a few weeks.
What can happen is that severe economic changes take place between countries. This can create dramatic changes between the currencies value of different countries. When that happens, it can create an incredible financial return for savvy, educated currency traders.
Before you enter the markets, you should learn how to find the current trend. For a skilled and educated trader, learning how to spot a trend is very important. A trend can last from a few hours, several days or several months. It can create an enormous financial return for the savvy.
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.
If you are an active trader and you dont have the trading software that has the moving trend line indicator, you will need to learn the skill of drawing correct Trendlines. An incorrectly drawn trendline can mean 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.
Correctly drawn trendlines can predict future levels of potential support in an uptrend as well as future levels of resistance in a downtrend. Draw a straight line connecting support levels without penetrating bodies or wicks of a candle in any uptrend.
Draw inner uptrendlines by finding the last two support levels and drawing the line from left to right. Likewise, draw the outer uptrendline by starting at the far left of the chart. Move to the right connecting the majority of the support levels with a straight line.
Go on a larger time frame like daily or weekly. Draw the longerterm trendline by connecting the support levels starting from the far left of the chart moving forward. Instead of a support level, use the resistance level to draw trendlines in a downtrend. That means all the rules are the same but in the opposite direction. The market reacts the same way in a downtrend as an uptrend but in an opposite direction. - 23218
You need right parts with right instructions to put them together in order to become a successful trader. After all, your car can come to a screeching halt due to a part such as a $2.00 gasket.
You should understand that forex trading is very different from trading stocks. Companies can file for bankruptcies like GM or Goldman Sachs or Enron. Companies can go completely out of business taking their share value to zero in the stock markets. However in case of currencies, there is no threat of a country going bankrupt or doing out of existence in a few weeks.
What can happen is that severe economic changes take place between countries. This can create dramatic changes between the currencies value of different countries. When that happens, it can create an incredible financial return for savvy, educated currency traders.
Before you enter the markets, you should learn how to find the current trend. For a skilled and educated trader, learning how to spot a trend is very important. A trend can last from a few hours, several days or several months. It can create an enormous financial return for the savvy.
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.
If you are an active trader and you dont have the trading software that has the moving trend line indicator, you will need to learn the skill of drawing correct Trendlines. An incorrectly drawn trendline can mean 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.
Correctly drawn trendlines can predict future levels of potential support in an uptrend as well as future levels of resistance in a downtrend. Draw a straight line connecting support levels without penetrating bodies or wicks of a candle in any uptrend.
Draw inner uptrendlines by finding the last two support levels and drawing the line from left to right. Likewise, draw the outer uptrendline by starting at the far left of the chart. Move to the right connecting the majority of the support levels with a straight line.
Go on a larger time frame like daily or weekly. Draw the longerterm trendline by connecting the support levels starting from the far left of the chart moving forward. Instead of a support level, use the resistance level to draw trendlines in a downtrend. That means all the rules are the same but in the opposite direction. The market reacts the same way in a downtrend as an uptrend but in an opposite direction. - 23218
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 X - Men @ 4:17 AM
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