Trend line indicator mt4
Trend line indicator mt4 is probably the most common form of technical analysis in forex trading which can be used on any currency pair and on any time frame. Trend lines are plotted along the uptrends and downtrends for the trader to quickly visualize the strength and slope of a given trend on a given timeframe. Its not difficult for a beginner either.
How do you draw trend lines?
A trend line is a straight line that starts at the beginning of a trend and stops at the end of the trend. You can use MT4’s built-in trend line tool to plot your trend line. Finding where to start and stop the trend line can be tricky,so let’s see how to spot trend lines. The very first thing to know about drawing trend lines is that you need at least two points in the market to start a trend line. Once the second swing high or low has been identified, you can draw your trend line. And it’s easy as we use Trend line indicator mt4 (meta trader 4).
When drawing trend lines in a downtrend, you draw them above the price. When you draw trend lines in an uptrend, you raw them below the price. It is the highs on a downtrend and the lows on an uptrend that will determine a trend line.
Let’s take a look at a trend line that was drawn during an uptrend.
Now let’s take a look at a trend line that was drawn during a downtrend.
At least two swing highs or swing lows are needed to draw a trend line in either direction.
Using the wicks or bodies of the candles
To draw trend lines, some traders use the bodies of the candlesticks, while others prefer the wicks. While the majority of people will use the wicks to draw trend lines, the use of the bodies is an acceptable way to draw trend lines on a chart.
The chart below shows a trend line drawn using the wicks of the candlestick.
The next chart below shows a trend line drawn using the bodies of the candles. Either of these are acceptable.
Trend lines are subjective, so use what you feel comfortable with. However, it is important not to deviate from the method that you choose.
Trend line as support or resistance
If a trend line has been identified and it is holding as support or resistance, then you can use the trend line to enter into the market once the price comes back to it.
The chart above shows the trend line being used as resistance and the price using it to find an entry.
A stop loss can be put on the other side of the trend line. The size of the stop loss depends on the strategy involved.
Trend line break
The trend line break method uses the actual breakout of the line to determine an entry. When the price breaks through a trend line, it is no longer valid as support or resistance and it is likely that the price will continue to reverse direction.
3 Keys to Drawing Trend Lines Effectively
There are three very important keys to drawing effective trend lines.
- The higher time frames will always produce the most reliable trend lines, so start there and work your way down.
- Most trend lines you come across will have some overlap from the high or low of a candle, but what’s important is getting the most touches possible without cutting through the body of a candle.
- Never try to force a trend line to fit – if it doesn’t fit the chart then it isn’t valid and is therefore not worth having on your chart.
If you can’t draw trend lines correctly or you need sound popup alert when a trend line breaks check out our Auto Trend line indicator with Alerts
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