Applying Trendlines

Once you have learned the Gann Swing Theory, it is time to focus on the trendlines. You already know how vital a trend is when you are dealing with the Forex market. The trendline in Forex is basically a single line. This line indicates a directional movement of a price from a point to another. When a price follows a trendline, it shows that the general direction is taken into consideration when the price changes.

However, if you want to make money in the Forex market, you should understand the trends and the concepts related to it. Almost all traders try to take hold of trends so that they can buy when the price lowers and sell when it increases. Therefore, the trendline is considered one of the essential concepts in the Forex market.

With the help of trendlines, it is possible to analyze and trade Forex charts successfully. But it is essential to utilize these correctly. If not, you might experience counterproductive results. This is why you need to learn the ways to apply trendlines in trading.

The trend is your friend concept

You would have heard that it is essential to treat the trend is your friend. Actually, no trading strategy has the possibility to create a 100% win rate; this means there are chances for losses as well. Because there isn’t any perfect strategy, the traders need to find ways to uplift their winning chances. One such technique that will increase the winning chances is a trend.

You need to learn how to apply trendlines in an imperfect scenario. By following trend trading, you can cover up imperfections in other strategies by focusing on strong trends in the Forex market. As mentioned below, a short trade will become successful even if the trader entered the temporarily rising market.

The strong dominant trend (downwards) will turn a losing trader into a winning trader, depending on the stop loss placement.

As per the chart below, there are more pips concerning the trend, than against the trend.

Determining the trend

Even after you understand what trend is, it is important to focus on the ways to determine the trend. To find a trend, you need to have a price chart with a currency pair between 100-200 candles. Then, decide in which direction prices are moving.

If you witness uptrend, then look for the series of higher lows and higher highs. The chart below shows a valid uptrend.

Check how successive high is higher when compared to the last. And each low is higher when compared to the one that follows.

However, trends will end; you should accept it. This uptrend will differ to a downtrend when the lower highs and lower lows settle. The below picture mentions how traders should be mindful of a trend reversal.

If you witness that the trend is down, you can establish a downtrend by focusing on a series of lower lows and lower highs on the chart. The chart below shows a valid downtrend.

When the series of higher lows and higher highs start to form, the downtrend changes, the below picture shows trend reversal.

There are no particular rules for determining high and lows to find trend analysis.

It is easy to find a successful Forex pair if you can identify the trend direction. If you can’t identify the trend direction, it is better to shift to the next prominent pair.

Trendlines on Forex

You can easily find a trend by applying Forex trendlines. When you use trendlines accurately, you will be able to detect when the market bounces off of support/resistance trendline or breakthrough support/ resistance and head in the opposite direction.

You can find a strong uptrend in the chart below. It shows higher lows and higher highs. By drawing a trend line connecting multiple lows in uptrend offers a visual perspective. And drawing a trend line connecting multiple highs to find a trend easily through visual perspective.

The chart reveals price levels that have a respected past while traveling upwards in the trend direction. The traders should be mindful of this, so they can focus on long entries until the uptrend ends.

The picture below will make things clear for you.

Wrapping up

To sum up, you can use trendlines wisely if you understand them. However, most traders misuse or misinterpret trendlines, so they struggle a lot to find the trend direction. Without finding the trend direction, it is impossible to trade Forex successfully. Hence, you must be mindful of factors and ideas related to trendlines.

After you have collected the information for applying trendlines, you can begin trading using the trendlines. Before that, it is essential to focus on the golden rules related to trendlines. In the next chapter, let us discuss the golden rules that every trader must know in regards to trendlines.