Accurate Analysis With Trendline
When starting forex trading there are several things that need to be considered so that trading can continue to experience consistent profits, one of which is the trading tools used. There are many types of this trading tool, such as a technical trading tool, namely the trendline. A technical trading that is often used but there are still many who do not know how to use a good trendline trading strategy so that they can gain more profit.
Trading Strategy with Trendline
Trendline has a dynamic nature so it is not uncommon for many people to make mistakes when implementing it. In fact, with the right strategy, this trendline can provide extraordinary benefits. Trading activities will become easier, and certainly more profitable.
Steps to Draw Trendline
- Identify support and resistance by finding the highest (swing high) and lowest (swing low) levels on a price chart. In this case, the high level acts as resistance and the low level is support.
- Pull the trendline from the adjacent resistance and support. The upper trendline takes the resistance level, while the lower trendline uses the support level. To draw this trendline, it takes at least two or more points that can be connected. In other words, the longer the trendline that can be drawn, the stronger the support and resistance levels.
- Do not force to draw a trendline if it is not possible, maybe market conditions are indeed uncertain.
TIPS FOR SUCCESSFUL TRADING WITH TRENDLINE
Determine the Time Frame to be Used
The choice of time frame seems to have contributed to trading success. The time frame is defined as a certain period of time which is determined as the period of observing price movements. The difference in time frames will affect the visuals of the candlesticks on the chart, so the prices that are read will also be different. In conjunction with trendline trading, traders can choose a time frame based on their trading style. If a scalper trader, then the time frame used ranges from M1 to H1. Likewise, if the trader is a day trader, the time frame that should be used is H4 to daily.
However, it should be noted that the determination of the time frame also has an impact on accuracy. The accuracy in question is validity, which in this case means the possibility of a valid trend line and the market can obey in the future. The noise factor or signal error often occurs in small time frames. That is why, the accuracy of trend lines drawn on small time frames such as M1 will be very low.
Determine Support and Resistance Levels
Determining support and resistance is a crucial matter for any forex trader, because they mark the locations where prices are most likely to experience significant movements. If the trader's goal is to find really strong support and resistance levels, there are three ways to try:
1. Psychological levels, usually interpreted so that they are easy to remember round numbers levels, for example 1.3000, 104.00 and others. Psychological levels are believed to be crucial areas where a bounce or breakout is likely to occur.
2. Look at swing high and swing low levels. Swing highs act as resistance if the price fails to penetrate a newly formed high, while swing lows act as support if the price fails to penetrate a newly formed low. The more often the level is visited, the stronger the support and resistance levels will be
3. Pivot point, which is the price level calculated based on the closing and opening prices on a daily basis (daily pivot). Although sometimes it can be as expected, the accuracy of support and resistance based on this pivot point is lower than psychological levels or swing highs and swing lows.
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