Trend Lines

Trend Lines

Trend Lines

Trend lines are some of the most basic tools you can use in your market analysis, especially if we’re talking about binary options. Those who learn how to apply these lines correctly have much bigger chances for accurate calculations. They are an indispensable tool of any serious trader, so if you one to become one you have to know all about them. In this article we will give you the exact definition of this term and show you the way this tool works. Stay with us!

Trend Lines | Definition

Let’s start by defining trend lines. They are lines that are drawn over pivot highs or under pivot lows to show the prevailing direction of price. They are a visual representation of support and resistance in any time frame. Besides being useful for showing direction and speed of a price, they also describe patterns during periods of price concentration. In other words, they are lines that traders draw by connecting a series of prices together. The resulting line gives the trader some idea of the direction in which an investment’s value might move. Basically, they help you use the charts properly. Keep reading and you will learn exactly how to draw them!

Trend Lines | How to Draw Them

Depending on a price’s trend, there are two types of lines – uptrend lines and downtrend lines. Uptrend lines connect two or more low points, but the second low point has to be higher than the first one. On the other hand, downtrend lines can be drawn by connecting two or more high points, but the second high has to be lower than the first one. Both of these types of trend lines act as a sort of barrier – as long as they are not broken, trends should remain unchanged. When the price breaks below or above the lines (depending on the type of trend, of course), this indicates that a trend reversal may happen very soon. This is why trend lines are so helpful in technical analysis.

Trend Lines | Support and Resistance

Once you have drawn your trend lines, you can predict areas of support and resistance much easier. Trend lines are used to identify the levels on a chart beyond which the price of an asset will have a difficult time moving, and that can be very useful for those looking for strategic entry levels. Many traders pay close attention to an asset when its price approaches a trend line because these areas often play a major role in determining its short-term direction. Obviously, just as many other Trend Indicators, these lines are best used in combination with other analytical tools.

Trend Lines | Conclusion

Trend lines are a very popular and very effective way to increase your chances in binary options trading. They are widely used and almost every trading platform will offer you some kind of trend lines to work with. You can learn how to draw them and how to interpret them very easily, and for little effort you could be awarded with some serious profit. Start practicing today and you will become a better trader in no time at all.

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FURTHER READING:

1. A course in financial calculus (A Etheridge – 2002)
2. The Investment Checklist: The Art Of In-Depth Research (M. Shearn, 2012)
3. The Essays Of Warren Buffett: Lessons For Corporate America (W. E. Buffett, L. A. Cunningham, 1997)
4. Responsible Excellence Pays! (Fussler, Claude-2004)
5. Liar’s Poker (M. Lewis, 2010)

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Author: Ben Prescott
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