Forex trend trading means looking for price changes in a specific direction, and then placing orders at the starting point of the trend as much as possible. Then, wait for the trend to run, and leave the market at the end of the trend as much as possible.

Trend trading sounds very simple, but like many things in foreign exchange trading, it is not. You will hear some foreign exchange traders say that “the trend is your friend”. The problem is that this is only the first half of the expression, the whole expression is “The trend is your friend until its end.”

Indeed, foreign exchange traders must adapt to the trend, because the challenge of foreign exchange trend trading is to identify the strength of the trend, and then determine the entry and position points.

Technical analysis is based on the assumption that there will be a trend in price, and the trend line is a very important tool to verify and confirm the trend. A trend line is a straight line connecting two or more high and low prices. After this straight line is extended, it is used as a reference for future resistance or support prices, so many theories that apply to resistance and support are also applicable to trend lines.

Forex trend line trading strategy

The trend line is the simplest and most important analysis tool in all transactions, but unfortunately many investors do not make full use of the trend line to a large extent. Extending the line of key highs or lows is the most objective way to determine whether the market is in an uptrend or downtrend. This step can also help investors determine support and resistance levels.

However, the delineation of trend lines is usually subjective, so trend analysis can be regarded as an art rather than a science. When drawing a trend line, the more contacts on the line, the stronger the trend line, and the more effective the price response from the trend line. Take the U.S. dollar index in the following figure as an example. The upward trend line implies that the exchange rate outlook is optimistic and you can enter the market. Usually the exchange rate is the best time to enter the market after falling back to the support point on the trend line. Similarly, if once the trend line is broken, it means that the exchange rate will fall sharply, the support line will turn into a resistance line, and market behavior may also change.