In forex trading, moves tend to work with particular trends such as consistent movement in one direction, then a pullback and consistent movement in the other direction. Using trend lines can give you the advantage as it shows you information which can be used together or separately. Using the information you were given can help you form a trading strategy that is based around it.
Trendlines can tell you the direction, speed and strength of the current price action as well as potential support or resistance of the movement in the future.
Prior to using the trend lines, fully understand them and only then should you base the trading strategy around it. Trendlines can only be used to your advantage when they are accurately done.
Trendlines are an efficient tool for analyzing the market. They can signal when the period of pullback, which is the movement against the trend, is over. It can also show you to the acceleration or reversing of a trend.
Using a trendline
To draw a trendline, the major highs and lows must be connected. To confirm a trendline, there must be three tops or bottoms. When drawing one, the trader needs at least two. Just like any other indicator, the more it is tested, the more reliable it can be. The steeper the trendline, the less reliable it is. Trendlines must not be used on their own, it's important to follow the pricing along with the trend lines.
It is imperative to fully understand the way price action and trends work in order to completely utilize trendlines. Since prices are constantly changing, trendlines can be used to simplify charts or even noise out some of the continuous activity. This allows you to focus on what is important.