Trendlines are one of my favorite trading tools because they allow us to explore market psychology and trends in many different ways and they are also universally applicable across timeframes, markets and market conditions.
How to draw and use trendlines 101
Generally speaking, it is advisable to wait for three confirmed points of contact before you start putting further attention to a trendline. Most traders make the mistake and connect the first two highs or lows and then get overly excited once the price gets there again. However, a trendline is only confirmed if you can get three points of contact because you can always connect any two random points on your charts. But when three points of contact are lining up, it is no coincidence anymore.
The next question that always comes up is whether you should use the candlestick-wicks or the candle-bodies to draw the trendlines!? The answer is confluence.
Whenever you get the best and the most contact points and confluence around your trendline, that’s how you draw it. There are no fixed rules about whether wicks or bodies are better. Just look for a trendline that gives you the most confirmation without beeing violated too much.
At the same time, consistency is very important as well. You should define for yourself how you draw trendlines and then always stick to that approach to avoid noise.
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#forex #trading #technicalanalysis
8 авг 2024
