Trend Line (Swing Highs and Lows)

What are Trend Lines? A trend line represents a supply and demand among traders. According to Wikipedia, A trend line is a bounding line for the price movement of a security.
A support trend line is drawn by connecting several swing lows and a resistance trend line is
drawn by connecting several swing highs.
Example of Support Trend Line:





A resistance trend line is drawn by connecting several swing highs
Example of Resistance Trend Line:















So first of all, let me go through with you how to locate a swing high and swing low before we
start to draw a trend line.

Swing high is basically an N-shaped formation with several candles on the left and right side
of a single high candle.

Swing low is basically a V-shaped formation with several candles on the left and right side of
a single low candle.














However we are not interested in all swing highs and lows when drawing a trend line, we are only looking out for those that have more weightage as this will produce trend line that is more significant. Below is the level of weightage for each formation

Weak Swing

Medium Swing

Big Swing

Once you have identified all the medium to big swing highs or lows, you can start to plot your
trend line. There are 2 types of trend lines you can draw and we will be going through all of
them in this book. They are

• Conventional Trend Line
• Tom Demark Trend Line

You need to have a good knowledge of these 2 different trend line drawing methods as you will need to combine them to have a better trading experience.

EUR USD Midterm Outlook 22-27 October 2012

Fibonacci Retracement

Fibonacci Retracement

Retracement trading is safer than breakout trading. The main levels to watch are:

38.2%, 50% 61.8% and 78.6% (or 76.4%)

The market will typically retrace after a strong move before continuing. The market won't always hit these levels exactly. For example, price may reverse mid way between 50% and 61.8% sometimes. Price can under shoot or over shoot a Fibonacci level. The 61.8% and 76.4% retracements are very popular levels for the market to retrace to. Watch these levels on the different timescales. It is the best to wait for a confirmation signal at or close to point C before entering a trade. The difficult part about trading Fibonacci retracements is knowing which level will hold.

For a buy, price should rise from a swing low at point A to a swing high at point B and retrace to point C at Fibonacci level. A swing low is a C bar turning point. The low of the middle bar is the lowest point of the swing.

For sell, price should drop from a swing high a point A to a swing low at point B and retrace up to point C. Look for intra day highs and lows, daily highs and lows, 2 day highs and lows and 3-5 day highs and lows, etc:

Candlestick patterns are most reliable near Fibonacci levels and other support and resistance lines. Candlestick are also good for signaling the end of  a retracement.

Double top and double bottoms often appear at Fibonacci levels e.g. 61.8% retracement or the 1.382% extension.

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