Hi! Today, I want to talk about trend lines and how useful they can be in your trading.
1. Valid Trend Lines
• For a trend line to be valid, it must connect at least three points.
• In the case of the US dollar versus Japanese yen, we are currently in an uptrend. Therefore, you should aim to connect three low points.
• Once you have a valid trend line, drawing it provides a visual aid, entry points, and stop levels. Each subsequent test of the trend line can indicate a place to add to your stops.
2. Importance of Trend Lines Over Time
• The older a trend line, the more significant it becomes.
• For example, a three-year trend line is more important than a three-month trend line, which is more significant than a weekly trend line.
3. Breaks in Trend Lines
• When a trend line breaks, it does not necessarily indicate a reversal. Sometimes, it means the market is just correcting lower and will resume its overall uptrend at a slower pace.
• For example, in the dollar-yen pair, a break might indicate a temporary correction rather than a complete reversal.
4. Long-term Trend Lines
• Long-term trend lines are crucial in trading.
• For instance, on the monthly US dollar versus Japanese yen chart, a significant breach in 2022 proved to be extremely dynamic.
5. Trend Lines as a Disciplinary Tool
• The most important aspect of trend lines is their role as a visual aid and their ability to enforce discipline.
• If a trend line breaks and you are still holding your position, you must question why you are holding it despite the trend line break.
In summary, trend lines are invaluable tools in trading, providing clear visual aids, guiding entry and stop points, and helping maintain trading discipline.
Disclaimer:
The information posted on Trading View is for informative purposes and is not intended to constitute advice in any form, including but not limited to investment, accounting, tax, legal or regulatory advice. The information therefore has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. Opinions expressed are our current opinions as of the date appearing on Trading View only. All illustrations, forecasts or hypothetical data are for illustrative purposes only. The Society of Technical Analysts Ltd does not make representation that the information provided is appropriate for use in all jurisdictions or by all Investors or other potential Investors. Parties are therefore responsible for compliance with applicable local laws and regulations. The Society of Technical Analysts will not be held liable for any loss or damage resulting directly or indirectly from the use of any information on this site.
1. Valid Trend Lines
• For a trend line to be valid, it must connect at least three points.
• In the case of the US dollar versus Japanese yen, we are currently in an uptrend. Therefore, you should aim to connect three low points.
• Once you have a valid trend line, drawing it provides a visual aid, entry points, and stop levels. Each subsequent test of the trend line can indicate a place to add to your stops.
2. Importance of Trend Lines Over Time
• The older a trend line, the more significant it becomes.
• For example, a three-year trend line is more important than a three-month trend line, which is more significant than a weekly trend line.
3. Breaks in Trend Lines
• When a trend line breaks, it does not necessarily indicate a reversal. Sometimes, it means the market is just correcting lower and will resume its overall uptrend at a slower pace.
• For example, in the dollar-yen pair, a break might indicate a temporary correction rather than a complete reversal.
4. Long-term Trend Lines
• Long-term trend lines are crucial in trading.
• For instance, on the monthly US dollar versus Japanese yen chart, a significant breach in 2022 proved to be extremely dynamic.
5. Trend Lines as a Disciplinary Tool
• The most important aspect of trend lines is their role as a visual aid and their ability to enforce discipline.
• If a trend line breaks and you are still holding your position, you must question why you are holding it despite the trend line break.
In summary, trend lines are invaluable tools in trading, providing clear visual aids, guiding entry and stop points, and helping maintain trading discipline.
Disclaimer:
The information posted on Trading View is for informative purposes and is not intended to constitute advice in any form, including but not limited to investment, accounting, tax, legal or regulatory advice. The information therefore has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. Opinions expressed are our current opinions as of the date appearing on Trading View only. All illustrations, forecasts or hypothetical data are for illustrative purposes only. The Society of Technical Analysts Ltd does not make representation that the information provided is appropriate for use in all jurisdictions or by all Investors or other potential Investors. Parties are therefore responsible for compliance with applicable local laws and regulations. The Society of Technical Analysts will not be held liable for any loss or damage resulting directly or indirectly from the use of any information on this site.
The STA is the oldest technical analysis organisation in the world and to celebrate that fact, we have a free downloadable book on technical analysis here -
technicalanalysts.com
technicalanalysts.com
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
The STA is the oldest technical analysis organisation in the world and to celebrate that fact, we have a free downloadable book on technical analysis here -
technicalanalysts.com
technicalanalysts.com
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.