Trendlines and Channels- Draw a manual

Trend line

May 19, 2014 in Forex analyzing Education
Trendlines & Channels
As mentioned earlier, a trendline is a straight line drawn over the price to
connect the swing highs in a downtrend, or under the price to connect the
swing lows in an uptrend, to represent the main direction of price and to
identify areas of support and resistance.

Pivot points are essential in drawing trendlines. Pivot points are basically
turning points referred to as reaction highs/lows, or more commonly as swing
highs/lows. In a downtrend, a trendline is applied by connecting two pivot highs
or swing high points (point A to point B). But in an uptrend, a trendline is
applied by connecting two pivot lows or swing lows (point C to point D).

The trend remains down until the price breaks the trendline, which represents
the resistance area that is preventing the price from moving higher. When the
price broke above that trendline, it began to form a new uptrend.
The trend remains up until the price breaks below the up trendline, which is
acting as support. Here, the trendline connecting the lows offers a support area
that prevents price from going down.
If you add a parallel trendline on the other side of the price, you will get a
channel. Channel lines are always parallel to each other.

There are three types of channels. A horizontal channel represents the
movement of a ranging market. A descending channel is drawn in a downtrend,
and an ascending channel is for an uptrend.
Although both lines of the channel can represent potential areas of support and
resistance, the superior trendline usually represents resistance, and the
inferior line represents support.
If the price bounces off the inferior trendline, you get a buy signal. On the
other hand, if price bounces off the superior trendline, you get a sell signal. An
ideal exit would be when the price touches the opposite trendline.
Trendlines or channels dont only help identify the trend, support and
resistance areas, they also serve as confirmation to Bollinger Band signals, and
are used in identifying important chart formations like flags and triangles.
Drawing a trendline is useful for Price Action analyzing.