What is the Trend Line?
A Trend Line is a drawing tool that can be used to freely draw lines on the price chart.
Drawing trend lines helps to trace price movements along with the trend.
The trend line is considered the first technical indicator in the world! And it is also the simplest tool in chart analysis.
What is a Trend in Forex?
A trend in Forex Trading is the tendency of prices to move towards a particular direction over some time.
A trend can be Upwards, Downwards, or even sideways. It can also be either long term or short term!
For successful Forex Trading, it is required of you to identify trends and position yourself along with them for profitable trading!
One way of identifying trends and using them to trade Forex on Olymp Trade is drawing trend lines!!
How to Set up Trend Line on Olymp Trade.
Set up the Trend Line on Olymp Trade by following the steps outlined below: –
- Log in to your Olymp Trade account.
- If using the phone App, locate and hit a “Pencil-like” tab, the Lines Tab.
- If using a PC or computer, locate and click the Indicators Tab.
- Choose the TREND line from the list of options that will appear. It’s at the bottom of the technical tool’s list.
- You will see a thick white button on the tip of your cursor.
- Click and hold your mouse from the point you want to start drawing to the point you want the drawing to end.
- Now release the cursor.
There you go!!
The only settings to be adjusted on a Trend Line is the thickness of the line and that is all!!
Understanding the Trend Line and Trend types.
As mentioned earlier, a Trend Line is the simplest technical indicator and tool in price chart analysis. This will mean that it is also very easy to understand. Let us get to understand it, together with the various trend types.
A Trend Line is used to draw lines for the trend; upwards, downwards, or sideways.
There are three main types of trends which occur on the Olymp Trade price chart;
- Upwards Trend.
- Downwards Trend.
- Sideways Trend.
Upwards Trend – This trend occurs when the price keeps going up, creating bottoms that are higher than the previous ones.
Downwards Trend – This trend occurs when the price continues to fall, creating tops that are lower than the previous ones.
Sideways Trend – This trend occurs if the price does not fall or rise continuously but creates equal tops and bottoms. These are almost on the same level as the previous ones.
Drawing Trend Lines.
We earlier mentioned that a Trend Line tool is used to draw lines on the chart. Let us get to know how you can draw trend lines for the types of trends we have learned.
Upwards Trend – Using the Trend Line, you will just need to draw a line that connects the successive bottoms.
We said that these bottoms will appear higher than the previous ones. This will produce a Trend Line going up! If such a line is extended, it will still be moving up meaning that the trend is surely Upwards.
Downwards Trend – Using the Trend Line, you will just need to draw a line that connects the successive tops. These tops are the ones that appear lower than each other.
This will produce a Trend Line moving down! Extending such a line indicates that the trend is certainly Downwards.
Sideways Trend – Using the Trend Line, you will just need to draw two lines. One line which connects the successive tops and another which connects the successive bottoms. This produces Trend Lines moving sideways!
Extending these two lines does not give you a definite upward or downwards direction. This means that the direction of the trend is not fit for taking either buy or sell positions. It is an unclear zone.
Easy to draw, Right?
Now we have understood How to Draw trend lines using the Trend Line drawing tool!
Let us move on to use the Trend Lines we have drawn to Trade Forex on Olymp Trade!
Using the TrendLines to Place Trades on Olymp Trade.
Before we get into many details, let us note the following;
- In an uptrend, the price will keep going up until the price breaks off the Upward Trendline going downward. This will mean that the trend has shifted from an Uptrend and is now becoming a Downtrend!
- Similarly, In a Downtrend, the price will keep going down until the price breaks out of the Downward Trend Line going Up. This will mean that the trend is changing from being a Downtrend to being an Uptrend!
Understood how Trend Lines work with price trends?
Let us now use that knowledge to open winning trades on the Olymp Trade platform.
- If the trend is Upwards according to the TrendLine you have drawn, then that is a BUY SIGNAL!! It is only wise that you take a Buy position!
- Similarly, if the trend is Downwards, then it goes without saying that it is a SELL SIGNAL. You can consider taking a Sell position at that moment!
- However, if the trend is Sideways, there is no clear upward or downward trend where you can confidently consider Buying or Selling! This means that the market is preparing for a new trend. Therefore, you should wait until such a clear trend presents, then you can make an appropriate decision.
With that knowledge, both long and short-term traders are suited by the TrendLine strategy of trading forex on Olymp Trade!
Say you are a swing trader trading based on 1 minute to 5 minutes. You can consider buying when the TrendLine indicates an Uptrend!! This is because the chances of the price going Up are more than the chances of the price going Down!
The same applies to Sell positions when the trend is Downward.
Points to Remember!
- The trendLine is the simplest technical indicator and tool in price chart analysis!
- If the trend is Upwards, that is a Buy Signal!
- Conversely, if the trend is Downwards, then that is a Sell Signal!
- If the trend is Sideways, then that is an Unclear zone!