Dancing with the Lines

Tips and Tricks About Forex Lines


Aug.28.2013

Now that you've learned about trend lines, it is time to overview some key tips and tricks about them.

As point 2 of the IDDA suggests, one of the ways to forecast its next move (or moves) is to find patterns in its previous moves. Since we have all the history of its movements right in front of us in our chart, the easiest way to find the patterns is by drawing lines and interpreting them.

 

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Then comes the question, "what's trending on the dance floor?"

In the trading world, the most well-known expression is, “The trend is your friend.” A trend on the forex dance floor (chart) is basically the direction in which the currency pair has been moving for a while. The idea behind it is that the pair will probably continue to trade in that direction until it hits an “obstacle.” These obstacles are called support and resistance.

Of course, depending on the time frame of your chart, you may see different trends for different periods of time.

Once you've identified the trend lines, keep in mind the following essentials.

Tips and Tricks About Forex Lines

1) Three makes a trend. You need at least two tops or bottoms to draw a trend line or a support or resistance level, but it takes three to confirm it

2) Trend lines, support or resistance levels, and channels become stronger the more times they are tested.

3) A previous support level can become a new resistance level, and vice versa. When prices break through a level, that level can potentially change its role, but remain a key level.

Ok. That's it for tips and tricks when it comes to Dancing with the Lines on a forex dance floor.. Are you ready to learn Forex Dance Patterns?

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