The Effectiveness of Trend Lines in Trading
Not a few traders take advantage of trend lines to make big profits. The best way to use trend lines is to combine technical analysis and charts of a trade. Trend lines will be the most special trading tool if used effectively. On the other hand, if used carelessly, the results will be ineffective and can sometimes be detrimental.
Proficiency in using trend lines is needed, especially in reading chart charts. Errors in reading can lead to misperceptions, such as prices that are thought to be rising when in fact they are not, or thinking that the trend is strengthening but the price is showing otherwise.
Basic Tools
As the name implies, trend lines will create a trend within a certain period of time (sideway movement). The trend line will connect the swing down, which is the swing down below any price. So if the price goes up, the swing down will also go up. By connecting the swing down through a line, an ascending trend line will be formed.
Thus, the result trend will be anik. In addition, the trend line can also be made above to become a swing up. This also shows the angle of increase and the strength of price movements, although not necessarily last long. When the price falls, the swing immediately dives sharply from the height. Connecting the swing high with the bottom will produce a descending tred line.
Thus, this situation represents a downward trend. Trend lines can also be made in the swing down area so that they show the downward angle of the falling price. This can be interpreted if the trend needs to be adjusted, especially when it is in the market. Trend lines are able to alert traders if there is an opportunity to enter a price signal.
Adjusting the Trendline
Drawing trendlines sometimes takes adjustment. Prices do not always move normally, and because trend lines represent time and price, they will always follow the axis. Every time there is an acceleration or decrease in the acceleration of a trend, it requires adjustment. Trendlines work like a tool, although they can't be used alone.
To decide whether the trend line should be adjusted or not, first consider how the price moves following the trend. If it turns out to be appropriate, the situation will get better for the trader. But if the trend line really breaks, there is a big chance the trader will lose. When there is an increasing trend, the price will be at the highest peak and the lowest peak. If this situation persists, the price will move down below the trend line. But this does not mean the trend line has stopped, but just needs to be adjusted again. When there is a downtrend, the price will be at the lowest bottom and the highest bottom. The price will move above the descending trend line. When this condition occurs, the trend line just needs to be adjusted again.
Trendlines as a Guide
When dealing with trading, trend lines will act as auxiliary instruments. Trend lines can warn of areas of great potential, such as when a short trend line meets a long trend line. Trend lines also need to be adjusted so that they become more precise when used as trading signals. Always remember that trend lines drawn at different angles can make a big difference to the price.
Therefore, when drawing trend lines as part of a strategy, use more definite criteria when trading. Trend lines can be added by other instruments such as engulfing patterns or other indicators to make them more precise and faster when volatility occurs. But if you only use trend lines as a reference, then traders don't need to draw trend lines in great detail. It is enough to create trend lines that are increasing or decreasing, this is enough to provide trend data and warnings about areas that have high trading potential. Even though the trend line is not used as a trading signal, the trend line is still able to provide relevant information regarding the ongoing trend without having to make adjustments every time.
Comments
Post a Comment