Technical analysis of price changes is a very important trading strategy. Finding and interpreting trends, trend changes and patterns help traders to profit in different market situations; and also help in minimizing trading risks. Trendlines
are the building blocks of most chart patterns; or are used to interpret the patterns. These are lines connecting the dots on a graph. Theses dots can be price heights, price lows, average price values or closing values. Generally trendlines are drawn connecting dots of similar types; for example daily highest price for a currency pair. Most of these lines are liner with slop to either left or right. But some trendlines can be curved in shape. Simply an uptrend occurs when the trendline connects lower dots to higher dots and downtrend occurs when the reverse happens. A consolidation occurs when the trendlines are horizontal or parallel.
Knowledge of trend patterns
is one of the key features of a successful trader. There are mainly two types of price patterns; continuation patterns and reversal patterns. When the existing trend halt for some time but then resumes its original trend, then the pattern is a continuation
pattern. Examples for continuation patterns include flags, wedges and pennants. Reversal
patterns occur when the existing trend halts and then goes the opposite direction. Examples include double bottoms, double tops and head and shoulders.
This blog is published for Orient Financial Brokers, the prominent Online Currency Trading broker
in UAE offering live forex trading accounts
for traders from Middle East countries.