Saturday, November 3, 2012

Conventional Trend Line


A conventional trend line is also known as a common sense trend line. The conventional
trend line consists of 3 types of lines mainly.

- Long Term Trend Line (BLACK)

The long term trend line is drawn over a longer period of time. Due to the higher weightage of

each swing high or low, the long term trend line will usually have more power than the
medium and short term trend line. This means that the price will most probably bounce off
the long term trend line for the first few times before it can break through it.














- Medium Term Trend Line (BLUE)

The medium term trend line is simply part of the long term trend line. From the last point of
contact of the long term trend line with the price, you can draw a medium term trend line. As
compared with the long term trend line, the medium term trend line passes through lesser
candles and thus has lesser weightage.















- Short Term Trend Line (RED)

The short term trend line is the most recent trend line and you will be using it to trade most of
the time.








Some of you may think that the long term trend line must be drawn from a higher time frame
and short term trend line is drawn on a lower time frame. In fact, all the long to short term
trend lines are drawn on the same chart


The difference between the various types of trend lines lies in the number of candlesticks or
period that the line passes through. For long term trend line, it has to be drawn over a longer
period of time while the short term trend line is usually drawn over a shorter period of time.
As for the period to draw, there is no specific guideline you should follow.


Rules for Conventional Trend Line:

  • The Best Trend Line Is One That Connects The Most Swing Highs or Lows
  • Once The Support Trend Line Is Broken, It Will Turn Into Resistance Trend Line
  • Once The Resistance Trend Line Is Broken, It Will Turn Into Support Trend Line




Steps to Drawing Your 3 Types of Conventional Trend Line:
Step 1: Shrink your selected time frame to a smaller size until you see the start of your current trend.
If the currency pair you are trading is currently in an up trend, you simply have to shrink your chart
until you can see the beginning of the up trend.

Step 2: If you are in a down trend, look for major swing highs and if you are in an up trend, you should
look at the major swing lows. (To draw a strong trend line, you need to have at least 3 points of
contacts which means that you need at least 3 swing highs or lows)

Step 4: Expand your selected time frame and look for major swing high or low after the last point of
contact for the long term trend line.

Step 5: Connect those swing highs and lows that you have found in step 4 and you will get your
medium term trend line

Step 6: Look at your recent candlesticks and draw the necessary trend line and that will be your short
term trend line










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