Types of Trends and Levels
Twenty Second session of Forex Training
Welcome back to Forex professional training in financial markets.
In this session types of trends and levels, support and resistance and price channel, plus trend breakthrough will be discussed.
Trend is the direction of price over a period of time which indicates market movement.
A level or region in which trend is supported for further movement on its current direction.
A level or area in which trend is inclined to change its direction for a reversal movement from its current orientation.
Level is a horizontal line in an area obtained from technical analysis such as Support and Resistance levels.
For instance, a Resistance level will transform into a Support level since its region crossed by market price considering on requisite.
On a candlestick chart in an upward trend, if a candlestick is formed completely above resistance level, next candlesticks must be developed above the previous candlestick.
Only under this circumstance, a Resistance can change to a Support level in this example.
Types of trends
Uptrends or Bullish trends
Uptrend direction known as bullish trend derived from butting by a bull.
When a bull wants to attack something with its horns, it will bring its head down followed by an abrupt lift, an exact manner as uptrend market price.
Support line in bullish trends is shaped by connecting valleys of price waves with a line considering that new valleys are higher than the old ones.
It is expected that trend will continue in its current direction.
Resistance line in bullish trends is formed by connecting peaks which will represent an opposite effect on an uptrend movement to cause a downfall.
Levels are horizontal lines connecting peaks or valleys in an upward or downward trend.
Reviewing some examples on MT4 platform would be useful. On AUSUSD symbol, despite of price decline, a transient ascendant trend is formed.
By connecting valleys with a line, a rising trend is formed in which market price moved.
Price has reached the resistance line which altered the trend direction then price has met resistance level again.
Each time market price met resistance line, trend direction has changed.
Eventually, resistance line has been crossed and several candlesticks have been formed below it, consequently an abrupt collapse has happened.
Market price moved temporarily in the channel between resistance and support lines that is formed by connecting the peaks. There is a level on 0.93538 that price has moved nearby even when it proceeded in the channel.
Despite of continuous price decline in AUDUSD symbol, an upward trend can be found, too. A support line can be drawn by connecting valleys.
A resistance line is formed by connecting peaks. Price has met support line several times along the significant effect of resistance line on trend direction.
Levels can be placed on certain prices where trend has fluctuated numerously.
Trader must be flexible and astute to draw most significant and effective support and resistance lines and levels.
Level can be placed considering a region of price oscillation so trader can right-click on it to open Horizontal Line properties for useful modification.
Level can be changed into a thicker line alongside of enabling a check box to consider level as background.
The exact place of level should be determined where it has more consequence on price market especially on most recent time rather than prior time.
Downtrends or Bearish trends
Down Trends or Bearish trends are derived from downward movement of a bear’s hand when it wants to smash something.
The support line in Bearish trends can be formed by connecting peaks of price waves which has agreeing effect on a price downfall.
The resistance line can be drawn by connecting valleys where traders expect reversal direction on price market, an upward trend.
Levels are horizontal lines on peaks and valleys of price waves.
Range trend is a line formed on an oscillatory market that does not have a continuous direction or a constant movement up or down.
On USDJPY, there are some Bearish trends that trader can draw support and resistance lines for.
There may be several irregular and asymmetrical pattern figures. Resistance and support lines can be drawn on a steep form, where price has decreased sharply.
Trader can place support level on peaks and resistance levels by connecting valleys.
The resistance level has transformed to a support line after some candlesticks passed it.
There would be multiple downward trends with different slopes and shapes.
Unlike previous example there would be another downfall with moderate slope that can be analysed through drawing support and resistance lines.
Support line connects the peaks of price waves and resistance line connects the valleys.
Trader can draw some support and resistance lines on range trends, however, these would be horizontal lines.
After drawing support and resistance lines on this trend, trader can realize that price has moved in a channel without any sharp and continuous movement up or down.
Price may increase and decrease with sharp slopes. For instance, price has fluctuated in a range trend with various slopes.
Trader must always update the location of levels and support and resistance lines on charts for higher efficiency.
Symmetrical price movement between support and resistance lines is called Channel.
For instance, trader can find a channel on an upward trend where price has risen moderately with fluctuation between support and resistance lines.
Support lines can be refined by making updates after most recent price movement.
In this example support line could be drawn between two valleys, and after next market price shift, trader could modify the support line considering the next valley.
The support line could be emended multiple times.
Level or Support/Resistance Breakthrough
Specifying breakthrough is one of the most troublesome issues.
Support or resistance lines and levels can be crossed by price multiple times, however, breaking happens rarely.
In a Bearish trend, if a candlestick is formed completely above the support line followed by another candlestick above the first candlestick then a break has happened.
Consider that the first candlestick must be passed by a maximum of 5 candlesticks.
If resistance line is passed completely by a candlestick and next candlesticks proceed lower than the first candlestick, then the resistance is broken.
In a Bullish trend, if a candlestick is completely above a resistance line and followed by candlesticks with higher price, then resistance line is broken by trend of the market.
Support line must be crossed by a trend and candlestick has to be developed under a support line completely and followed by lower value candlesticks, then support line is broken.
It would be more advantageous to explain break through on MT4 platform.
In the first example, there would be no break until timeframe of 1st of April, where price has broken the support line of a Bullish trend and decline has continued.
The other example is about a broken level.
If the level is drawn on 101.28, it is vivid that on 27th of March, a candlestick is completely formed over this level and it is followed by another candlestick above it.
The price has proceeded towards an upside. Moreover, this level is passed multiple times toward upside or downside followed by agreeing direction candles.
It is essential that the first candlestick must be passed by other candlesticks which shows that price trend will proceed the same direction rather than returning to the support or resistance lines.
The candlestick above the level is formed and followed by another candlestick, thus market direction is continued.
A small candlestick has formed under the level but the next candlestick did not pass the first one, hence price has returned to the level.
So trader could place Buy order on certain spots above the candlestick which passed the break through candlestick and in another example, Sell order could be placed under the certain candlestick.
On an uptrend example, if trader draws a support line connecting valleys, the first candlestick has passed the support line, but there is no other candlestick lower than the first candlestick, so price has returned.
Trader must update the support line as market price has continued its movement.
For support lines trader must connect each valley considering the most recent one.
Perhaps, breakthrough has sometimes failed and trader always updates the lines to the most recent valleys or peaks until a successful breakthrough.
That concludes this session, until next time and another session take care.