How to Draw Trend Lines Perfectly Every Time

by Justin Bennett · January 6, 2023

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Trend lines have become widely popular as a way to identify possible support or resistance.

But one question still lingers among Forex traders – how should I draw trend lines?

In this lesson, we’ll discuss what trend lines are as well as how to draw them.

I’m also going to share a secret way that I like to use trend lines to spot potential tops and bottoms in a market, so be sure to read the lesson in its entirety.

Let’s get started!

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What Are Trend Lines?

As the name implies, trend lines are levels used in technical analysis that can be drawn along a trend to represent either support or resistance, depending on the direction of the trend.

Think of them as the diagonal equivalent of horizontal support and resistance.

These trend lines can help us to identify potential areas of increased supply and demand, which can cause the market to move down or up respectively.

Notice how in the GBPUSD daily chart above, the market touched off of trend line support several times over an extended period of time.

This trend line represented an area of support where traders can begin to look for buying opportunities.

Similar to the GBPUSD uptrend in the first chart, this AUDNZD downtrend touched off of our trend line several times over an extended period of time.

The difference is that the trend line above represents a downtrend, during which time it acts as resistance, giving traders an opportunity to look for selling opportunities.

How to Draw Trend Lines Correctly

Now that we have a good understanding of what trend lines are, let’s go over how to draw them.

Notice in the chart above, we have two main points at which we can start to draw our trend line. Once this level has been established, we can start to look for bullish price action to join the rally.

The bullish pin bar above provided a signal to traders that the trend line was likely to hold. This gave traders an opportunity to buy at support to join the rally.

3 Keys to Drawing Trend Lines Effectively

1. Use the Higher Time Frames for Drawing Trend Lines
   Just about everything I do in the Forex market begins on the daily time frame and drawing trend lines is no exception.
2. Trend Lines and Candlesticks – Wick or Candle Body?
   One of the most common questions when it comes to drawing trend lines is, should they be drawn from the high/low of a candle or from the open/close of the candle.
3. Never Force a Trend Line to Fit
   This is perhaps the most common pitfall Forex traders make when drawing trend lines.

How to Use Trend Lines to Spot Market Reversals

As promised, I’m going to show you a way that I like to use trend lines to determine the strength of a trend.

We can see in the GBPCHF daily chart above, that the pair had respected a trend line for some time.

Notice how shortly after breaking trend line resistance, the market came back to retest the trend line as new support and formed a bullish pin bar in the process.

Summary

I hope this lesson has given you a better understanding of how to draw trend lines and how they can be used in the Forex market.

We’ve covered a lot in this lesson, so let’s recap some of the important points.