How to Draw Trend Lines on Charts

It takes two points to draw a line, any line, trend lines are no different. A price chart is a flat surface. It has two dimensions, length and width. If the first point is a lower price and the next price point greater, the trend line drawn will be upward sloping. If the first price point is higher than the second price point, the trend line drawn will be downward sloping. Two points at the same price will be horizontal and considered as price support and resistance. Horizontal lines do not have slope. Their slope is undefined. Trend lines define areas of sloping support and resistance.

Trend lines with at least a 30 degree slope are acceptable to trade the trend. A 45 degree slope is better. A slope of 60 degrees, a steep slope, is unsustainable. Steeper slopes can provide excellent quick trading profit. With steeper slopes price moves quickly and has substantial momentum. These steep slope price movements can end abruptly and might not be suitable without sufficient trading experience.

chart-upward-trend-currencyAs a rule of thumb trend lines should approximate the slope of the 120 moving average line. It’s best when the 120 moving average line is inside the trend line. That is, the 120 MA is slightly atop an upward sloping trend line and below a downward sloping trend line. Forex candlestick price chart examples illustrating concepts of upward and downward trendlines are provided below.

“Remember 30, 45 and 60 degree trendlines.”

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