Profitable Trading with Trendline

In the Foreign Exchange market there is one of the most traded trading strategy, trendline trading system based on support and resistance levels. This technical method can be traded to determine market trend, entry position, and exit point.
Usually this system are found through making trend lines inside of our trading platform, so in this article we will learn on making trendlines on the market prices.

When we start making trendlines it is important co know that not every forex currency trader will make their trendline the same. Where we make our trendlines may not be precisely place others. This is never mine as long as we know the method that trendlines must connect at least 2 common price levels on our chart. Here is an example

In the chart above you can see the price is traded in a bullish trend. Our trend line is made by connecting a series of low price levels on our chart. This trend line is representing as support level since market price is expected to pretend as a floor in this situation, which market price keeping at these points.

When this trend line is made, Forex currency traders will find to make chance of new higher highs by opening long positions. The right time to open buy entries in an bullish trend occurs when market price moves down to support level and reverse. When market prices has touched support level but not closed below trend line, Forex participants may find to open new long positions. If trading a bullish trend, Forex participants can also set limit risk by plotting stop losses under trendline or under support level.

And in our chart above you can see market price declining in a bearish trend. You can see how the resistance trendline is made by connecting the highs on this chart. Market prices have touched the resistance levels for the fourth time. It is significant to know that the more times a trendline is touched but not breaking trough, the weaker it becomes. In this situations, trend traders usually prefer to trade trendlines on either the 3rd or 4th touch.

Since the trendline is moved bearish an market price is trading lower, we should considered the market price in a strong bearish trend. Trend traders can trade this situation to trade market swings by searching to short positions if market price trades back up to resistance level. Currency traders should find for market price to test resistance level but not close above the trend line. When market price starts trading back in the way of the market trend, we have an accurate short signal. In this situation stop losses could be plotted above the trendline or above the support level.