How to draw Trend Lines.

Trend lines are an important process in your technical analysis. It helps to identify the respective supply and demand of a

market. How a market respects a trend is a clear indication of where you would buy and sell for a swing trade (long-term).

Although trend lines are pre-dominantly for long-term trading, you can use them for scalps although if you were looking at

drawing trend-lines, you’d be holding for a longer period of time.

They are simple to draw, and just as simple to understand.

When drawing trend lines, you must remember:

• The higher time frames will always produce the most reliable trend lines,
so start there and work your way down
• Most trend lines you come across will have some overlap from the high or
low of a candle, but what’s important is getting the most touches possible
without cutting through the body of a candle
• Never try to force a trend line to fit – if it doesn’t fit the chart then it isn’t
valid and is therefore not worth having on your chart

Below is an example of USD/JPY daily trend line.

As you can see from the above image, this is a trend line drawn on the 1D
(Daily) chart. Although a body of a candle near the top of the trend line broke
through, it wasn’t a clean break, and further confirmed by downside after the
small break. It respectively touched the trend line all the way down until the
point shown below:
The question most will ask, is how do I know where to enter?

You would enter every time a wick/candle touches the trend line. On the
downward trend, you would of entered at every touch, including the small
break, with a SELLSTOP in just below the trend line following the break.

The trend found reversal, and broke through our trend line with a solid
candle, indicating a trend reversal for entry in the opposing direction (in this
case bullish).

Since the trend isn’t always so clear on the upside or downside; we have
sideways trends as shown below:
As you can see above, you would have bought at every touch above and
below. Sometimes we don’t have clear indication of upwards and downwards
trends, and so we can rely on a sideways trend. Remember, two touches of
the line to indicate a trend.

Do I necessarily need to draw trend lines on the highest of timeframes?

No, of course not. You can draw trend lines on smaller timeframes to attain a
reduced amount of pips per trade. As you can see from the below, I have
drawn a trend line on the hourly (H1) chart to show a clear short term trend.

From the above, we have 3-4 touches on the trend line respectively for you to
take advantage of to ride down the short term trend.
You can also see the same on the five hourly chart (H5) below, with the same
respective trend that day.

How do I spot potential reversals?

A reversal becomes clear after a candle breaks the trend line cleanly. As you
can see below, we had a clean break, indicating reversal and the beginning of
a new trend. A break in the trend line that has had 3 or more touches typically
indicates a reversal.

If you have any questions on the trend lines, don’t hesitate to ask but this
should make it as simple as it gets for you to begin using them.
Things to remember:

• Trend lines are a horizontal form of support and resistance.

• The higher timeframes help to indicate stronger trends, so work your
way down
• Most trend lines have overlaps of wicks, and sometimes the body of
the candle, but this is totally normal.
• Don’t over complicate the trend line. Don’t force it to fit.