Trend lines






From Wikipedia, the free encyclopedia

A trend line is formed when you can draw a diagonal line between two or more price pivot points. They are commonly used to judge entry and exit investment timing when trading securities.

A trend line is a bounding line for the price movement of a security. A support trend line is formed when a securities price decreases and then rebounds at a pivot point that aligns with at least two previous support pivot points. Similarly a resistance trend line is formed when a securities price increases and then rebounds at a pivot point that aligns with at least two previous resistance pivot points. The following chart provides an example of support and resistance trend lines:

Trend lines are a simple and widely used technical analysis approach to judging entry and exit investment timing. To establish a trend line historical data, typically presented in the format of a chart such as the above price chart, is required. Historically, trend lines have been drawn by hand on paper charts, but it is now more common to use charting software that enables trend lines to be drawn on computer based charts. There are some charting software that will automatically generate trend lines, however most traders prefer to draw their own trendlines.

When establishing trend lines it is important to choose a chart based on a price interval period that aligns with your trading strategy. Short term traders tend to use charts based on interval periods, such as 1 minute (i.e. the price of the security is plotted on the chart every 1 minute), with longer term traders using price charts based on hourly, daily, weekly and monthly interval periods.

However, time periods can also be viewed in terms of years. For example, below is a chart of the S&P 500 since the earliest data point until April 2008. Please note that while the Oracle example above uses a linear scale of price changes, long term data is more often viewed as logarithmic: e.g. the changes are really an attempt to approxiamate percentage changes than pure numerical value. If we were to view this same chart linearly, we would not be able to see any detail from 1950 to about 1990 simply because all the data would be compressed to the bottom.


Trend lines are typically used with price charts, however they can also be used with a range of technical analysis charts such as MACD and RSI. Trend lines can be used to identify positive and negative trending charts, whereby a positive trending chart forms an upsloping line when the support and the resistance pivots points are aligned, and a negative trending chart froms a downsloping line when the support and resistance pivot points are aligned.

Trend lines are used in many ways by traders. If a stock price is moving between support and resistance trendlines, then a basic investment strategy commonly used by traders, is to buy a stock at support and sell at resistance, then short at resistance and cover the short at support. The logic behind this, is that when the price returns to an existing principal trendline it may be an opportunity to open new positions in the direction of the trend, in the belief that the trendline will hold and the trend will continue further. A second way is that when price action breaks through the principal trendline of an existing trend, it is evidence that the trend may be going to fail, and a trader may consider trading in the opposite direction to the existing trend, or exiting positions in the direction of the trend.

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Forex Technical Analysis

The difference between forex technical and fundamental analysis is that forex technical analysis ignores fundamental factors and is applied only to the price action of the market. Forex technical analysis primarily consists of a variety of forex technical studies, each of which can be interpreted to predict market direction or to generate buy and sell signals. The technical analysis works by correlating the results of current and moves markets to create a short-term outlook for currencies. The rolling data that is produced throughout the trading day creates the interest in the markets and informs traders of the strong markets to back.
Technical Analysis is analysing pursuant to historical data graph. The graph can be made by various analysis. One example of the trend-line is to see the direction of market movement. Other analysis is Relative Strength Index (RSI), Parabolic SAR, Pivot Point (Support / Resistance Level) and Elliot Wave theory.

The Trend is Your Friend

Forex technical analysis is largely based around forex market movement trends, thus creating the widely used phrase 'the trend is your friend' amongst traders. Buying and selling at the right time is the key in maintaining good levels of profits, following a trend is also about knowing where to entry a trade and more importantly where to exit.

Support and Resistance

Support and resistance is the basic of forex technical analysis. Support and resistance levels are points where a chart experiences recurring upward or downward pressure. A support level is usually the low point in any chart pattern (hourly, weekly or annually), whereas a resistance level is the high or the peak point of the pattern. Buying and selling at the support and resistance points makes a greater profit margin as long as they remain unbroken.

Tends To History Repeat Itself

Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movement. The repetitive nature of price movements is attributed to market psychology, in other words, market participants tend to provide a consistent reaction to similar market stimuli over time. Forex technical analysis uses chart patterns to analyze forex market movements and understand trends. Although many of these charts have been used for more than 30 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves.

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Forex, What is it ?


According to the survey of the BIS (Bank for International settlement - World central bank), is done by the end of 2004, the forex market transaction value reaching more than USD $ 1.4 Trilyun by his time. As a result, perspective investment in forex trading is very good.

Forex, What is it?

The international currency market Forex is a particular kind of world financial markets. The purpose of Trader on the Forex to get profits as a result of foreign exchange buying and selling. The exchange rates of all currencies currently on the market turnover are constantly changing under the action of supply and demand change. The latter is a solid under the influence of any important for human society event in the field of economics, politics and nature. Accordingly, the current prices of currencies measured by example in the U.S. dollar fluctuates with a view to its top and bottom lines. The use of these fluctuations, according to a principle known "buy cheaper - sell higher" operators to obtain gains. Forex is different in comparison to all other sectors of the global financial system due to its increased sensitivity to a large and ever-changing number of factors, accessibility to all traders and corporate exclusively top trade turnover which creates an ensured liquidity of currency and exchange tower - the clock working hours that enable professionals to cope after hours or during holidays in their country seeking to open markets abroad.

Like any other market trading on the Forex, and only with a great potential for profitability, risk is essentially - wearing. It is possible to get a hit on the right after some training, including familiarization with the structure and nature of Forex, the principles of price formation currencies, the factors affecting prices of transformation and exchange risk levels, sources of information necessary to account all these factors, technical analysis and forecasting market movements as well as negotiating tools and rules. An important role in the process of preparation of trading on the Forex is the demotrading (ie trade using a demonstration with some virtual currency), which allows to testify all the theoretical knowledge and gain a minimum requirement of experience in the trade are not subject to damage equipment.

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