As an investor, we must always remember that the correct judgment of the trend is the key to success in investment, always follow the trend to invest, do not go against the trend; those who follow the trend will prosper, and those who contradict the trend will die. Learning to use trend lines to determine the direction of a trend is one of the essential basic skills for an investor.
In the foreign exchange market, when foreign exchange investors buy and sell foreign exchange, using the chart as a reference will help us understand the ins and outs of market trends more objectively, thereby assisting us in judging the rise and fall of the market
Forex trend line
Among foreign exchange technical analysis, trend line is a chart technical analysis method often used by traders. Although the application of reason is simple, it has practical value. The basic concept of the trend line is: In a wave of upward trend, two or two low points of the rising wave are connected into a line and extended to form an upward trend line; in a downward trend, the two Or the high points of two or more down waves are connected to form a line and extended to form a downtrend line.
The theory of the trend line is: if the market trend runs above the rising trend line, investors can still hold long positions, and the market outlook continues to be bullish; if it breaks the rising trend line, it is regarded as a change in the market structure and the market outlook is adjusted to be bearish. On the contrary, if the market trend is running below the downtrend line, investors can hold short positions; if the price breaks above the downtrend line, it is regarded as a change in the market structure, and the market outlook is bullish.
The trend line can be divided into a support line and a pressure line. The low and low points of the price band are connected into a straight line, which is the support line; the high and high points of the price band are connected into a straight line, which is the pressure line. The length of the trend line is proportional to its importance. The distance between the first point and the second point of the long-term trend line and the mid-term trend line should not be too close. If the distance is too close, the importance of the formed trend line will decrease.
The angle of the trend line is very important. An angle that is too flat shows that it is not strong enough and it is not easy to produce a big market immediately; a trend line that is too steep is not durable and tends to change the trend quickly. The famous angle line master Gann believes that the 45-degree angle trend line is very reliable, which is what Gann called the 1×1 angle line.
Establishing a trend line is very important for operation. “Follow the trend” is the essence.
The support line and the pressure line can be transformed into each other. When the price breaks through a support line from top to bottom, the original support line may turn into a pressure line; and when the price breaks through a pressure line from bottom to top, the original The pressure line may also turn into a support line. At some point, we can find that the price is running between two parallel trend lines. The upper line is the pressure line and the lower line is the support line. Two trend lines constitute a channel or pattern.
Tips and methods for using trend lines
The trend of the foreign exchange market is determined by the strength of the long and short parties. The trading chart is actually a record of long and short power. When the bulls have the upper hand, the chart is the trend of one wave above the other; when the shorts have the advantage, the chart is the trend of the wave below the other. Therefore, the market above the upward trend line is usually manifested as a wave higher than the direction of movement.
The market below the downward trend line is usually manifested as a wave below the direction of movement. If the trend breaks the upward trend line, it means that the bull power has weakened and the rising inertial force has reversed, so it becomes a bearish signal; on the contrary, if the trend breaks the downward trend line, it proves that the short power has weakened and the declining inertial force has reversed , So it becomes a bullish signal.
Purchasing and selling based solely on trend line signals seems relatively simple. Because simply linking two or three wave bottoms or tops to form an uptrend line or downtrend line is very easy. Things that are too easy tend not to have a high rate of return. And most of the single-reference trend line trades are novice traders.
Therefore, the foreign exchange market likes to use trend line superstitions as cannon fodder. The market often breaks the line slightly, forming a technical chart trap for investors to test, and then turning back to knock out the participant’s stop loss, resulting in loss and helplessness. So when the chart temporarily breaks the downtrend line or breaks the uptrend line, you have to judge based on the fundamental factors at the time. Determine whether the fundamentals in the market are really bullish or bearish, so that it is not easy to be confused by false breakthroughs. If the store cooperates with the technical side, then the effectiveness of this signal is greatly increased.
According to the length of time, Dow Theory can be divided into long-term trends, mid-term trends and short-term trends.
The long-term trend has a long time span, usually more than one year; the medium-term trend has a shorter time span than the long-term trend, but greater than the short-term trend, usually 4 to 13 weeks; the short-term trend is shorter, generally within 4 weeks. A long-term trend is composed of several medium-term trends, and a medium-term trend is composed of several short-term trends. Investors should analyze the long-term trend first, then analyze the mid-term trend, and then analyze the short-term trend in accordance with the principle of long-term trend analysis. The long term manages the medium term, and the medium term manages the short term. And the mid-term trend is crucial. Investors are easier to grasp, and the practicality is the strongest. Therefore, it is best to start from the mid-term trend when learning trend analysis.
The trend line can be divided into a support line and a pressure line. Connecting the low and low points of the period price band into a straight line is the support line; connecting the high and high points of the period price band into a straight line is the pressure line. The more points the trend line connects, the stronger its reliability. The length of the trend line is proportional to its importance. The distance between the first point and the second point of the long-term trend line and the mid-term trend line should not be too close, such as too close. , The importance of the formed trend line will decrease.
The angle of the trend line is very important. An angle that is too flat shows that it is not strong enough and it is not easy to produce a big market immediately; a trend line that is too steep is not durable and tends to change the trend quickly.
The famous angle line master Gann believes that the 45-degree angle trend line is very reliable, which is what Gann called the 1×1 angle line.
Establishing a trend line is very important for operation. “Follow the trend” is the essence of it, but this sentence should be understood flexibly. It is very important to determine the fundamental situation. Trend changes are caused by changes in fundamentals. If the trend is determined to be upward (downward), you should do more. Single (short order), do not do the opposite, and in a volatile market, once a trend is formed, it should be counter-technical operations, such as buying plunges, selling soaring.