Forex technical analysis: use and drawing of trend lines
The concept of trend mainly refers to the direction of price movement, which is the embodiment of the orderly characteristics of price fluctuations and the main performance of the biased characteristics of random price fluctuations. The trend is actually the true reproduction of Newton’s law of inertia in physics, the most famous kinematics in physics, and the most fundamental and core factor in technical analysis. Even the national macroeconomic operation has development trends at various stages, and there are obvious development trends at various stages in various industries.
The most important investment principle of actual investors is to follow the trend, that is, follow the trend of the price running along the minimum resistance, and operate with the price fluctuation trend to reach the “unity of man and nature”.
The trend line is actually a methodical combat to simplify the trajectory and direction of price fluctuations.It can filter out small price fluctuations, so that we can easily and clearly grasp the direction and trend of price fluctuations. . The drawing method of the trend line is to connect the low point and the low point of the fluctuating running price, or the straight line connecting the high point and the high point. If the price is running in a way that a low is higher than a low, the trend line drawn is the upward trend line, which is the support line; if the price is running according to a high point lower than a high point, the trend drawn The line is the downward trend line, that is, the pressure line; the other is that the low and high points of the price extend laterally, and there is no obvious upward and downward trend. This is the sideways consolidation or box consolidation. According to the length of time, the trend can be divided into long-term trend, medium-term trend and short-term trend. A long-term trend generally consists of several medium-term trends, while a medium-term trend consists of several short-term trends.
Generally speaking, the trend line drawn only needs two low points or high points to form, but the trend line is touched at least three times to confirm the effectiveness of the trend line. The more times the trend line is touched, the more important it is. The longer the trend line lasts, the more effective the trend line will be.
There are three types of trend lines:
- The upward trend line (low points continue to rise)
- Downtrend line (high points continue to decrease)
- Sort the trend line sideways (interval fluctuation)
Here are some points to keep in mind about trend lines:
- At least two tops or bottoms are required to draw an effective trend line, but a third point is required to determine the trend line;
- The steeper the trend line drawn, the lower its reliability, and the greater the chance of it being broken;
- As with horizontal support and resistance levels, the more times the trend line is tested, the stronger the support or resistance level role it plays;
- The most important thing is to never force the trend line drawn to adapt to the market. If they are not suitable for market trends, then this trend line is invalid.