In the posts of December 17th and 18th, we talked about trends and how to recognize them. The fact that prices move in trends is one of the most important assumptions on which Technical Analysis is based. This is a really essential thing to learn about in Forex trading.
When you look at a Forex chart you will see some straight lines going up or down - these are Trend lines. An "up" trend line is formed by connecting two or more low points, where the second low is higher than the first. An up trend line indicates that net demand (demand minus supply) is increasing at the same time as the price is rising. If prices remain above the trend line, the trend is seen as solid. If the trend line crosses through the price line, this is a sell signal.
A "down" trend line is formed by connecting two or more high points, where the second high is lower than the first. A down trend line indicates that net supply (supply minus demand) is increasing at the same time as the price declines. As long as prices remain below the downtrend line, the trend is seen as solid. If the trend line crosses the price line, this indicates a buy signal.
Uptrend lines and downtrend lines act as "support" and "resistance" respectively. Tomorrow we will discuss what support and resistance mean. Charting is an essential part of Forex trading and Easy-Forex teach you everything you need to know about charts through their excellent tutorial systems - so you'll find it's not as difficult as it looks! And it makes all the difference to your ability to make winning trades.
And remember there's more information about Forex at
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