Trend lines are probably the most common form of technical analysis in forex trading. They are probably one of the most underutilized ones as well. If drawn correctly, they can be as accurate as any other method. Unfortunately, most forex traders don’t draw them correctly or try to make the line fit the market instead of the other way around.
In their most basic form, an uptrend line is drawn along the bottom of easily identifiable support areas (valleys).
In a downtrend, the trend line is drawn along the top of easily identifiable resistance areas (peaks).
There are two important market analysis methods in Forex:
- Technical analysis
- Fundamental analysis
(There is also sentimental analysis but the above two are really the most important and common methods of analysis.)
Both of the above analysis are important to learn for a Forex trader. And, when it comes to technical analysis, you can’t do anything without Forex charts. Chart patterns are very important in analyzing the market this way.
You can learn about some of the important chart patterns here:
Types of Trends
There are three types of trends:
- Uptrend (higher lows)
- Downtrend (lower highs)
- Sideways trends (ranging)