Simple Forex Systems Applying Trend Lines: Can You Actually Win With Them?

There are a lot of forex strategies that you can master or assemble for yourself but one of the most straightforward involves using trend lines to signal when you should buy or sell.

These lines are very easy to draw and can spot patterns in the movements of the foreign exchange markets. This might help you to foretell a downswing or an upswing so that you have an opportunity to make profits from buying or selling currencies at the right time.

Trend lines will be most visible on a candlestick graph. First identify whether the market is surging up or declining or broadly stable. You are able to do this at a glance with a candlestick chart.

If the market is climbing, draw a straight upward line through the highest highs on the chart. Then draw a parallel line connecting the lowest lows. The zone between is the channel through which the prices are currently rising.

If the market is plunging, do the opposite by marking the line that passes through the lowest lows, then draw a parallel line above the highest highs. This will identify a descending channel.

If the market is stable you will get a horizontal channel. You can then create a forex trading strategy based on these patterns.

The most usual method that traders use these channels for spot currency trading strategies is to suppose that prices will fluctuate within them in the short term. So any time the price hits the top line, that would be a trigger to sell, on the theory that the price is likely to turn back down within the channel. On the other hand, if it hits the bottom line, that would be a signal to buy.

The upper line is thought to be a resistance line, above which prices are not likely to soar while the trend persists. The bottom line is seen as a support line, below which prices has a very little chance to fall.

However you do have to bear in mind that the trend could reverse at any point. Because of this, many traders will only enter the market to go short when the price moves above the top (resistance) boundary of an upward trend, and not when it surges above the resistance line of a downward trend because this can be an indicator that the trend is reversing.

You may also look at what conditions would indicate that a horizontal pattern is likely to precede a breakout. For instance you could backtest a strategy that if a horizontal pattern follows a series of downtrends, the horizontal channel in itself represents a support area and the next significant trend is very likely to be upward. Still, always test theories like this ahead of creating any system around them. The best control tool is using forex signals. If you sign up for the service of a reliable forex signal provider, you'll be in the position to try out trend turning or breakout systems more efficiently.

Obviously there are no guarantees with any method and currency trading is always risky so be sure to make lots of tests before you start investing real cash. You can use a forex demo account to run real time tests and make sure that your system shows a sufficient profit over the longer term before you start to back your chosen forex trading strategies in a real account.

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