Using trendlines is a common practice in the technical and fundamental analysis of Forex charts. Identifying the trendlines from data is possible only during technical analysis. An A/B currency trendline chart is illustrated below. Trading in currency A has not been a problem for about 3 years, but I’m sure that most short term traders would watch the visible fluctuations with very keen eyes. These fluctuations are common after sharp changes like the one of the left of the chart. These patterns occurs to most currency pairs in the world today.
The resistance trend line is the time behavior of the highs over the three years illustrated on this chart. One might say it is the trail of different resistance points calculated over smaller periods. A similar approach is used in drawing the support trend line. Although the resistance trend line seems to touch most of the tips, the support trendline is only close to some of the lows, and keeps intersecting the chart over a considerable length of time. This type of trend is common for currencies, which pick steadily, but suffer bad falls through the struggle. No matter how small the time interval of your chart, such behavior takes time to stabilise.
Trendlines show an overall picture, they highlight and easily identify the times where currencies rub up and fluctuate against another for a long period of time. A trendline is commonly found for weekly, monthly and yearly charts. In Metatrader these slots are labelled as periodicity, and typically render the charts in fixed timeframes: M1 = the last 1 minute of activity, M5 = the last 5 minutes, and respective M15, M30, H1 (the H stands for hour, so (for example) H4 would be the last 4 hrs, then we are able to view the fluctuation activity for the day (D1), week (W1) and the month’s worth of data (MN). The periodicty in MT5 software is a bit more flexible as it allows you to set custom timeframes. Trendlines are often used in technical analysis, so that experts can use historic data for accurate predictions. A well-performing FX chart is easy to find because they have upward directing trendlines, both in cases of support and resistance. You normally find trendlines to be parallel to one another, especially in the cases of major world currencies such as USD, AUD, JPY and CHF. However, when two currencies come from nations that have continued disturbance in their relationship, big fluctuations can destroy the similarity of support and resistance trendlines.
A trendline can also be created by joining the different pivot marks on each day. Such lines are usually upward slanting for currencies that are consistently outperforming the other currency in a pair. Some strong currencies like the CHF, AUD and JPY are presently showing this trend for the last few years against smaller value currencies. However, these currencies are also tied to the dollar.
Trendline information is very important for regular investors. Even first-time investors benefit from trendlines when they have to make their first FX transaction. Traders looking for trendlines and patterns have used many technically advanced tools. The more frequently you trade in FX, the more necessary such software items are. Although free editions are available on the internet, owning systems like MACD and RSI will allow you to understand the benefits of watching the system very closely.
You can also depend on the live FOREX updates, historical data and economic calendars available on your Forex brokers website to discover the trending data and associated patterns of any currency pair.
Note the interesting behavior of support and resistance on this chart. Such trendline patterns exist due to major changes over a period of time in any currency pair. Even minor changes along this pattern could be crucial to fast scalping traders. Trendline behaviors can get complicated at times. However, you should analyze the trendline of one parameter at a time.