Lesson #17: Trend Line
A trend line is a fundamental element of technical analysis we introduced earlier on in our guide. Even though they are not much used, they do communicate much information.
An uptrend trend line is drawn starting from a visible support area which is the turning point from a downtrend to an uptrend of a pair of currencies, while a downtrend trend line is drawn starting from a visible resistance area which is the area where we can identify the turning point from an uptrend to a downtrend of a pair of currencies.
One of the most common uses of trend lines is the fact that they can help to quickly identify trends and therefore simplify the process of strategy creation.
Despite of uptrend lines and downtrend lines, it is possible to identify a third type of lines, the sideways ones. They are used to identify a trend that is neither going up nor down, but that it is constant on a given value for a long period of time.
When analyzing trend lines, make sure to understand if what tracked is going to be relevant to you. Specifically, create forex strategies that are supported by repetitive trends over time and not strategies that are supported by not confirmed trends.
Please note that you have to draw uptrends and sideways at the bottom of the line of the graph, while you draw downtrends at the top of a line.