In the example of the U. Dollar Index , the positive slope casts a bullish outlook, with the broad game plan to buy as price trends higher. So where should our entry point be? A pullback into trendline support would be the most favorable entry.
With the same respect, a break often offers sharper and more significant reversals. Once a trendline support is broken, the slope now becomes resistance for prices, and often foreshadows a change in market behavior.
This slope can now be seen as a reference of invalidation for the current move lower. Likewise, a breach above a trendline resistance sees that line as support for the subsequent move higher. Once the slope broke in December, if offered clear resistance on the subsequent rally in early before moving lower.
Likewise, the breach above in June fueled a rally higher, which inevitably found support back at that same trendline. This fundamental use of trendlines is constant across slope analysis and is the basis of the methodology. Find more trading tips and strategies in our free forex trading guides. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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Trend lines are fairly graphical representations of Forex price behavior that guide Forex traders' decisions to buy, sell or even issue a. Forex trend line is one of the basic concepts of technical analysis, based on assumption that market participants make decisions in herds. A trend is when prices move in a zigzag fashion but still follow an imaginary path or a trend in one direction. The trend can be further defined by a trend line.