How to Draw Trend-Lines on a Forex Chart

This blog post is a continuation from my last post, where I discussed how to read between the trend-lines in Forex charts. (If you missed it, read it here.)

Now, we’re continuing the discussion of how to draw trend-lines in a Forex chart.

Is there a right way to draw trend-lines? The short answer is YES!

At first, it may seem easy enough to draw a straight line from point A to point B. But then you realize that it’s not always clear where point A is — or point B! Today I’ll show you how I draw trend-lines that provide useful information, and why I think it’s the best.

Draw lines on your charts to identify prices where the market has reacted in the past.

We don’t know for certain that a previous level of support or resistance will hold price back again in the future, but we do know that there is something going on there that could affect momentum again.
The reason why it reacted or struggled at that level is less important then knowing there is a level to remember for future reference.

Here’s what we’re doing. Trend-lines are markers that keep track of levels in price that the market is attracted to, or where you expect momentum to slow or even reverse direction. When price reaches a reactionary level like that, it often gets jumpy and throws volatility spikes just above or below those significant levels, as if to test the market’s patience beyond those price points. It’s not the spike in price action that matters, it’s the level where the price bar closes or opens that’s important.

Here are 3 tips for drawing trend-lines or horizontal lines that will help you trade.

  • Real Bodies! The real body of a candlestick is contained within the open and the close of a price bar. When you draw your trend-line or horizontal line, look for as many “real bodies” to line up as possible. You will find spikes to that level as well, but it’s the opens and closes that have the most significance. The more real bodies touching your trendline, the better! Everybody loves a real body!
  • Example of Real Bodies In Forex Price Chart

    Example of Real Bodies in Forex Price Chart

  • Keep it current! If you’re looking for the current relevant price levels to keep track of, start with the high and low of the current day, and the high and low of the previous day. You’ll be surprised how often that gives you everything you need for your intraday trading.
  • Current Relevant Price Levels Forex Chart Example

  • Favorite numbers! Numbers that end in 70 or 30 tend to work like support/resistance. If you’re trying to pinpoint a horizontal line, check to see if it’s close to a number that ends in 70 or 30. See the chart below for an example of how accurate the “70” and “30” numbers are for capturing the ebb and flow of price action.
  • Numbers That End In 70 or 30 Forex Chart Example

    There are lots of ways to draw lines on your charts and make visually pleasing patterns. But, when things get confusing, just remember why you were drawing trend-lines on your charts in the fist place. Price moves in repeatable patterns. When you can anticipate what comes next, you can trade.

    Charting price action makes you smarter every day!

    Jennifer has been trading Forex since 2001. She developed a strategy to anticipate market movements based on repeatable patterns seen in every market.

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