Many friends will ask me: how to draw the trend line? How to use it? Trendlines are frequently used technical indicators in trading; today's article mainly talks about how to draw trendlines on MT4.
MT4 software is the trading software used by 99% of traders. The function and convenience of this software are better than those of Wenhua Finance and Game Master in China.
The trend line is one of the simple technical indicators in technical analysis. The purpose of drawing the trend line is to conduct price analysis, find the support or resistance of the price in the future, and use it to make trading decisions.
The article is long, it is recommended to bookmark and read, if you think it is rewarding, you can like it.
First: What is a trendline?
The source of technical analysis is Dow Theory, which has the logic of peaks and troughs. Uptrends are ever-higher peaks and troughs, and downtrends are ever-lower peaks and troughs.
An uptrend line is a straight line drawn upward along a rising trough. A downtrend line is a straight line drawn down from the peaks of successive rallies. This is the most basic concept of trendlines. When I was in school, I learned the theory of mathematics. Two points determine a line. Therefore, to draw a trend line, you need two rising troughs or two falling peaks.
The figure below is a schematic diagram of an uptrend line and a downtrend line
Second: How to draw a trend line
(All the examples below take the rising trend line as an example)
(1) Draw a trend line to connect the upper and lower leads of the k-line, do not connect the entity of the k-line; do not have price crossings; connect the lowest point of the peak and trough, the purpose of drawing this line is mainly to ensure the consistency of each line we draw sex.
Because once the trend line is allowed to cross the leading line or entity of the k-line, it is difficult to define the range that can cross the shadow line and the entity? This will result in the inconsistency of the standards in the process of marking the line; the inconsistency of the trend line has no execution power in actual combat.
see legend
(2) Connecting peaks and troughs at the same level; the trend of the trend is cyclical; only the peaks and troughs connecting the trend line at the same level have the meaning of technical analysis; that is to say, the trend line can be used as support in this case and resistance use.
see legend
(3) The rising trend line connects the low point before the high point; the downward trend line connects the high point before the low point; this line combines the logic of Dow Theory, and many traders draw the wrong high and low based on the current price point.
(4) The trend line can be used as a support before the position is broken, and it has a counterpressure effect after the position is broken. Once the upward trend line is broken, it will act as pressure, and once the downward trend line is broken, it will act as support.
(5) The trend line is used in combination with other indicators, such as the most common k-line reversal. It can also resonate with indicators such as moving averages to enter the market.
Third: the limitation of the trend line
As the most basic technical indicator, the trend line has the biggest limitation that it needs to add the subjective judgment of traders. The trend lines drawn by different traders on the same chart may be different, and there is basically no unified standard, only general principles.
Compared with other technical indicators, such as "moving average", the price of the moving average seen by everyone is the same; with the 60-day moving average as the support, all traders who use the 60-day moving average indicator will participate in the transaction at the same price; Because the price of the moving average is automatically generated by the chart, there is no need for human subjective judgment.
Therefore, the moving average as a support level is more objective than the trend line; but the trend line, as a technical indicator for trend tracking, is more flexible than the solidification of the moving average, which can be large or small, close or far away, and is more conducive to tracking the market.
The above is the basic method used in actual combat of the trend line.
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