If you want to know about the price movement of the currency pairs then there is nothing more helpful than the trend lines. Want to know about the current market? Look at the trends. It is as simple as that. Trends have been a good friend to the investors in this market for quite a long time now and it has proven its worth to others by keeping up the good work.
Using price actions to know the day-to-day value of currency pairs is a good idea but when you are trying to hit a deal and go long, you cannot only rely on support and resistance. You will need something to look at the bigger picture. You will also require to see how the price changed in the earlier days. When you can understand the pattern of price movement, it will give you better scopes to look for good entry points.
Now, you might have understood how important it is to use a trend line. Trend lines used strategically can bring much profit to the investors. But the question is how to identify a trend? Now, you need to know that being an investor means you will not only require to read trends, you will also have to draw them.
Each investor has their preferences and specific time frames. Based on that, you can build your trend lines. When you draw trend lines on your own, it gives you a better insight into a prevailing trend. Always remember, a trend has different phases and you must understand them all. Unless you develop strong skills related to trend trading techniques, it will be hard to become good at CFD trading.
Know the terms
When you are trying to identify a trend line, you will find the need to learn various terms. The must-know terms in analyzing a trend are uptrend and downtrend. What are uptrends and downtrends? An uptrend is a slope that indicates an increase in the price value of a commodity. In simpler words, an uptrend is the price movement on the rise. A downtrend is a slope that denotes a price decline. An uptrend is also called a bullish trend while a downtrend is also called a bearish trend.
Now apart from the bullish and bearish trend, there is also another type of trend known as the sideways trend or flat trend. This condition is also known as market consolidation as the price doesn’t move much. Investors often find market consolidation a nightmare as it makes the market less volatile and makes it more difficult to earn money from trading.
Therefore, when you know the common terms of a trend line, it becomes easy for you to understand a trend chart. Having a better understanding is always helpful when you are analyzing the CFD market. Always try to connect the highs and lows in higher time frame while drawing the trend lines as it gives you better signals.
Learn about the breakouts
Breakouts are some important events of the investment market. These breakouts lead to the birth of new trends in the market. We all know that a trend never remains persistent and the trend always ends after some time. Because let’s be honest. If only one trend existed then there wouldn’t have been any scope to make profit. Now, breakouts happen when a commodity is overbought or oversold at a point where its value accelerates the fastest and passes the high. At that level, tension exists either in the supply or demand of that product. Thus, the price starts moving in an opposite direction, arising a new trend.
That’s why keeping an eye on the breakouts can help you identify the trends. However, fake-outs can often be misleading when trying to identify a trend. That’s why it is very important to distinguish a breakout from a fake-out.
To make money in the trading industry, trend lines benefit you the most. Therefore, an investor should always look at a trend line to understand more about price movements.