have identified the previous swing high.

Now, using our chart tools, we draw a line connecting the two swing highs that we just identified. When we draw, we draw from right to left. The result should be a line slanting downwards, since price is in a downtrend, making lower lows. Once our line is drawn from right to left, we again use our chart drawing tools and extend the line towards the right-- towards where price action is yet to occur.

When price action eventually penetrates the line, you have a signal that a possible trend reversal is beginning.

What if prices are tren

If you're thinking about trading currencies in the Forex markets, learning to draw accurate trendlines is essential to your financial survival. You may be tempted to draw intuitive trendlines, based on simply eyeballing charts and identifying which way prices are moving. Don't do it! Accurate trendlines are relatively easy to draw. Let's have a go at it!

We begin our journey by familiarizing ourselves with the drawing tools made available to us by our charting package. With that knowledge under our belts, we proceed to step two: definitions!

Our charts should be showing Japanese candlesticks, as opposed to the traditional bars that we see when inspecting stock charts. Japanese candlesticks are par for trading currencies. (You'll be hard put to find any material that references bar charts with respect to Forex currency trading.)

We are looking to define two types of events: "swing highs" and "swing lows". Often these are called "cycle" highs and "cycle" lows.

A "swing high" is a candle whose top wick (or flat top) is higher than the candle to its left and the candle to its right. It follows then that a "swing low" is a candle whose bottom wick (or flat bottom) is lower than the candle to its left and the candle to its right.

If prices are moving upward, we need to identify swing lows. If prices are moving downward, we need to identify swing highs.

Let us say that prices have been trending downward. Our mission is to identify the swing highs, and to connect them with a line so as to identify when penetration of that line occurs.

We begin our search on the far right of our chart(s). This will yield the most recent "swing high" while the price is trending down.

With "swing highs" we look at the top of each candle. Wick or flat top, we ask: is the top of a candle higher than the top of the candle on its left and the top of the candle on its right? If so, remembering that we are starting our search on the far right of the chart, we have identified the first "swing high", that is to say: the most recent swing high.

Now we keep looking left on the chart until we find the previous "swing high" that occurred. We're still looking at the top of the candles (wick or no wick). When we find a candle with a top wick or flat top that is higher than the one immediately to its left and the one immediately to its right, we have identified the previous swing high.

Now, using our chart tools, we draw a line connecting the two swing highs that we just identified. When we draw, we draw from right to left. The result should be a line slanting downwards, since price is in a downtrend, making lower lows. Once our line is drawn from right to left, we again use our chart drawing tools and extend the line towards the right-- towards where price action is yet to occur.

When price action eventually penetrates the line, you have a signal that a possible trend reversal is beginning.

What if prices are trend

andlesticks, as opposed to the traditional bars that we see when inspecting stock charts. Japanese candlesticks are par for trading currencies. (You'll be hard put to find any material that references bar charts with respect to Forex currency trading.)

We are looking to define two types of events: "swing highs" and "swing lows". Often these are called "cycle" highs and "cycle" lows.

A "swing high" is a candle whose top wick (or flat top) is higher than the candle to its left and the candle to its right. It follows then that a "swing low" is a candle whose bottom wick (or flat bottom) is lower than the candle to its left and the candle to its right.

If prices are moving upward, we need to identify swing lows. If prices are moving downward, we need to identify swing highs.

Let us say that prices have been trending downward. Our mission is to identify the swing highs, and to connect them with a line so as to identify when penetration of that line occurs.

We begin our search on the far right of our chart(s). This will yield the most recent "swing high" while the price is trending down.

With "swing highs" we look at the top of each candle. Wick or flat top, we ask: is the top of a candle higher than the top of the candle on its left and the top of the candle on its right? If so, remembering that we are starting our search on the far right of the chart, we have identified the first "swing high", that is to say: the most recent swing high.

Now we keep looking left on the chart until we find the previous "swing high" that occurred. We're still looking at the top of the candles (wick or no wick). When we find a candle with a top wick or flat top that is higher than the one immediately to its left and the one immediately to its right, we have identified the previous swing high.

Now, using our chart tools, we draw a line connecting the two swing highs that we just identified. When we draw, we draw from right to left. The result should be a line slanting downwards, since price is in a downtrend, making lower lows. Once our line is drawn from right to left, we again use our chart drawing tools and extend the line towards the right-- towards where price action is yet to occur.

When price action eventually penetrates the line, you have a signal that a possible trend reversal is beginning.

What if prices are tren

m) is lower than the candle to its left and the candle to its right.

If prices are moving upward, we need to identify swing lows. If prices are moving downward, we need to identify swing highs.

Let us say that prices have been trending downward. Our mission is to identify the swing highs, and to connect them with a line so as to identify when penetration of that line occurs.

We begin our search on the far right of our chart(s). This will yield the most recent "swing high" while the price is trending down.

With "swing highs" we look at the top of each candle. Wick or flat top, we ask: is the top of a candle higher than the top of the candle on its left and the top of the candle on its right? If so, remembering that we are starting our search on the far right of the chart, we have identified the first "swing high", that is to say: the most recent swing high.

Now we keep looking left on the chart until we find the previous "swing high" that occurred. We're still looking at the top of the candles (wick or no wick). When we find a candle with a top wick or flat top that is higher than the one immediately to its left and the one immediately to its right, we have identified the previous swing high.

Now, using our chart tools, we draw a line connecting the two swing highs that we just identified. When we draw, we draw from right to left. The result should be a line slanting downwards, since price is in a downtrend, making lower lows. Once our line is drawn from right to left, we again use our chart drawing tools and extend the line towards the right-- towards where price action is yet to occur.

When price action eventually penetrates the line, you have a signal that a possible trend reversal is beginning.

What if prices are tren

at top, we ask: is the top of a candle higher than the top of the candle on its left and the top of the candle on its right? If so, remembering that we are starting our search on the far right of the chart, we have identified the first "swing high", that is to say: the most recent swing high.

Now we keep looking left on the chart until we find the previous "swing high" that occurred. We're still looking at the top of the candles (wick or no wick). When we find a candle with a top wick or flat top that is higher than the one immediately to its left and the one immediately to its right, we have identified the previous swing high.

Now, using our chart tools, we draw a line connecting the two swing highs that we just identified. When we draw, we draw from right to left. The result should be a line slanting downwards, since price is in a downtrend, making lower lows. Once our line is drawn from right to left, we again use our chart drawing tools and extend the line towards the right-- towards where price action is yet to occur.

When price action eventually penetrates the line, you have a signal that a possible trend reversal is beginning.

What if prices are tren

have identified the previous swing high.

Now, using our chart tools, we draw a line connecting the two swing highs that we just identified. When we draw, we draw from right to left. The result should be a line slanting downwards, since price is in a downtrend, making lower lows. Once our line is drawn from right to left, we again use our chart drawing tools and extend the line towards the right-- towards where price action is yet to occur.

When price action eventually penetrates the line, you have a signal that a possible trend reversal is beginning.

What if prices are trending upwards? Again we begin our search on the far right of the chart(s), this time looking for swing lows.

We are now, with prices in an uptrend, looking at the bottom of candles, wick or no wick. We want to find the most recent candle (farthest to our right on the chart) where the bottom is lower than the candle on its left and the candle on its right.

Next we want to keep looking left and identify the next candle with a bottom that is lower than the candle on its left and the candle on its right. Again, we connect the two swing lows, drawing a line from right to left-- then extending the line towards the far right, where there is no price action yet. Since prices are in an uptrend, our line will be slanting upwards. When the upcoming prices start heading south and penetrate the line, you have a signal that a possible tren reversal is under way.

Of course, these potential "trend reversals" could be fake-outs. Otherwise, trading trendline penetrations would be child simple. Everybody would do it, and the whole trading thing wouldn't work: there would be no losers. Everyone would get rich, quit the good ol' 9 to 5 job-- and society would fall apart. We certainly don't want that.

And that makes trading based only on trendlines pretty darn much suicidal. Foolish and financially destitute is the trader who relies on only one indicator. After you have practiced drawing trendlines, your goal is simple enough. Start looking at other financial indicators until you find one or several that provide you with signals which confirm or deny the validity of trendline breaks. MACD anyone? RSI? Stochastics? Good luck with your trading!