The standard set of MT4 trading terminal includes many tools for graphical analysis of the price chart, trend line is one of them. Trend line, without exaggeration, can be called one of the most common and effective tools. So, trend line – what is it?
Calling and setting the ‘trend line’ tool
There is a button to call a trend line on the toolbar. After clicking on this button, a line can be drawn on the price chart by connecting the selected point to the desired point on the chart. By default, the trend line is a thin ray, usually red in colour. To change something in the settings of this tool, you should put the cursor over the line and make a double click, as a result of which the menu of trend line settings will appear. You can choose the thickness and colour of the line, you can make the line dotted instead of continuous, you can make the line just a line instead of a ray.
How to build a trend line
Usually, this tool is used to connect maximum or minimum price values on the chart. And by the angle of inclination of the graphical tool, you can determine the presence or absence of a trend. The steeper the angle relative to the horizon, the more pronounced is the trend movement of this trading asset. It is worth remembering that the larger the time interval (timeframe) is considered, the more correctly one can perceive the graphical lines of analysis, due to the absence of market noise.
Examples of drawing trend lines
If you connect the points of minimum price values on a chart section with a trend line, this line is called ‘support’ in trader’s slang. The line connecting the maximum price values is also called ‘resistance’. The more often the price bounces off the support or resistance, the greater the value and strength of this trend line. If the price breaks the trend line, we can talk about a change in the trend of price movement, although we should not forget about the so-called false breakdowns. This is when after breaking the trend line (support or resistance), the price returns to the initial values.
Construction of graphical figures
When using a trend line, connecting the highs and lows of the price, you can get graphical figures (patterns), which can be both reversal (changing the trend of price movement) and trend continuation figures. Very common among novice traders, can be called trading on graphical patterns. However, it is worth remembering that all existing graphical patterns are well worked out only on charts of older timeframes (H1, H4, D, W).