Charts and indicatorsUpdated 2 min readBy the FXNOD team
How to draw trendlines correctly
To draw a trendline, connect at least two rising swing lows in an uptrend, or two falling swing highs in a downtrend, and extend the line forward. A third touch confirms it. Draw it where it fits the most turning points without cutting through the body of the price, and treat it as a zone, not an exact line.
Step by step
Zoom out
Find the trend on a higher timeframe first.
Mark the swing points
The clear lows of an uptrend or highs of a downtrend.
Join two of them
The first and the next significant one.
Extend the line to the right
It now shows where the trend would be tested next.
Wait for a third touch
Two points always make a line. Three suggest the market respects it.
What makes a trendline worth having
| Feature | Stronger | Weaker |
|---|---|---|
| Touches | Three or more | Two |
| Timeframe | Daily or higher | One minute |
| Angle | Moderate | Very steep; it will break soon |
| Spacing of touches | Spread out | Bunched together |
Wicks or bodies?
Either is defensible. Lines drawn through wicks catch the true extremes; lines through closes ignore brief spikes. Choose one and keep to it, and accept that a real trendline is a band a little wider than the line you drew.
Common mistakes
- Forcing a line: moving the anchors until it fits what you want to see.
- Redrawing after every break, so the line can never be wrong.
- Drawing through the middle of candles.
- Treating a break as a reversal. A break often leads to a sideways pause or a shallower trend.
- Covering the chart in lines until every price is near one.
Using a trendline
- As a guide to the trend's direction and speed.
- As a place to look for a pullback entry, confirmed by the price turning there.
- As a warning when it breaks that the trend may be changing.
- A channel adds a parallel line through the opposite extremes.
In FXNOD
Trade Pilot's chart has drawing tools for lines. On a synthetic index a trendline describes a path that chance produced, and has no bearing on where the price goes next.
Questions people ask
- How many points do you need for a trendline?
- Two to draw it and a third to confirm it.
- What does it mean when a trendline breaks?
- That the trend's pace has changed. It may reverse, pause, or continue at a different angle.
- Are trendlines subjective?
- Yes. Two traders will draw them differently, which is why they work best as a guide combined with other evidence.
Put it on a chart
Trade Pilot's chart has moving averages, RSI and Bollinger Bands, and a bot in Bot Forge can use indicators to choose its side. Try both on your Deriv demo account.
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