How to Draw and Use Trendlines in Forex Trading Efficiently.

 Trendlines in Fore Trading are used to make decisions on the best time to enter and exit trades. Learn how to draw trendlines efficiently and use them to your advantage. Trendlines and combining them with price action as part of your trading strategy is one of the most important trading concepts you must learn, understand and apply in order to be a successful trader.

What are Trendlines?

A trendline is a line that we draw on our charts that connects the swing lows during a TRENDING MARKET.

Why do we draw Trendlines in Forex?

1. Trendlines can act as support or resistance.

In a bearish trending market, the downward trend line provides resistance: the price goes up and reverses back down from the trendline.

In a bullish trending market, the upward trendline provides support for prices: prices go down touch the trendline and bounce back up from the support provided by the upward trendline

Trading tip: You do not enter trades blindly just because the price has touched a trendline, you always wait for Price Action (we will discuss this later in this guide.

2. A break of a trendline can signal a possible trend change.

In a downtrend, we will have a trendline drawn above the trend and when the price breaks the trendline, it can signal a possible trend change to an uptrend.

In an uptrend, a break of the trendline can act as a possible trend You need to pair these trendline breaks with key price action keys such as rejections and some of which we will discuss later on.

How to Draw Trendlines in Forex Trading?

Trendlines can be applied in a variety of ways but this is our preferred method to adapt to all price movements.

Concepts to follow when drawing trendlines.

1. You need a minimum of 2 touches.

The more touches the better, but more touches do not guarantee that it will hold the next time around (Make sure to keep your swing highs and lows contained inside the trendlines)

2. Trendlines aren’t always smooth Trends are often choppy and imperfect just like the market.

3. Treat trendlines as “AREAS”

Just like Support and Resistance, trendlines are areas and this means that you should use them as guidance for your overall analysis, not the Law.

4. Don’t force trendlines.

If trendlines are obvious and help your analysis draw them in but if not leave them out because there won’t always be suitable price movement where you can draw a trendline.

When drawing a trendline, draw it longer and further out. This is because if price comes back to this trendline in the future, you want to have it ready as a reminder to look for Price Action.

Imperfect Trendlines.

A type of imperfect trendline you will often see is when not all the points are touching. This means that when you draw your trendlines, you won’t be able to always connect all the swing highs and lows when drawing trendlines.

Draw your trendlines in an area that gets the greatest number of touches (Leave the Rest Out)

How to Use Trendlines in Forex as a Reversal Trading Strategy?

Firstly, you should look for key price action patterns that have been formed right before a trendline break.

There are many kinds of price action patterns you can look for such as wedges, triangles, combining price action patterns with candlestick patterns etc.

If you are still new to trading then focus on double top or bottom patterns as well as trend change patterns (tight before a trendline break)