Add Trend Line on Chart

Sometimes support and resistances are formed diagonally on a similar way like a stair case. This forms a trend which is a sustained movement in one direction either upward or downward.

A trend line depicts the points of support and resistance for the market price, based on the direction of the price. For an upwards moving market it will shows the points of support & for a downwards moving market it will show the areas of resistance and they are used mainly by many investors to identify these resistance & support zones.

Indices Trend Line is a straight line that connects 2 or more stock price points and extends in to the future to act as a zone of support/resistance for the price movement. There are 2 various different types: upwards and downward. It is an aspect of stock technical analysis that uses line studies to try and predict where the next move will head to. A trader must know how to draw & analyze the signals derived/generated by this tool.

The basis of this analysis is based upon the idea that the markets move in trends. They are used to display 3 things.

The general direction - up/down.
The strength of the current move - and
Where future support and resistance will be likely located

If trend-lines forms in a certain direction then market mostly moves in that particular direction for quite some time until a time when it's broken.

Plotting these on a stock chart highlights the general and overall trend of the market price which can either be upward or downward.

Displayed Below is example illustration of how to draw these on charts

Guide: How to Draw and Trade Upward Move

Upwards Trend Line Analysis in Indices Trade - Add Trend Line on Stock Chart

Guide: How to Draw and Trade Down-wards Move

Downwards Trend-Line Analysis in Indices Trade - How Do I Draw Trendlines on Stock Charts?

The MT4 software provides charting & trading tools for drawing these on stock charts. To draw them onto a stock chart, investors can use the tool provided on the MetaTrader 4 software that is shown/illustrated below.

How Do I Draw Trendlines Trading? - Place Trend-line on Chart

To draw on this on a stock chart just click the drawing tool above on the MT4 technical analysis software platform & choose point A where you want to begin drawing & then point B where you want the it to touch. You can also right click on trend line & on properties option select option to extend its ray by checking 'ray check box', if you don't want to extend it, then untick/uncheck this option in your platform. You also can change other properties like color and width on this property pop-up panel window of the properties. You can download MT4 software & learn trading analysis with it.

The trend is your best friend. Is a popular saying among investors because you never should go against it. This is most reliable strategy to trade because once stock prices begin to move in one direction they can continue to move in that particular direction for quite some time - hence using this method presents opportunity to make profits from the market.

Principles of How to Draw

Use candle charts
The points which are used to draw are along the lows of the price bars in a upwards market. An upwards bullish move is defined by higher highs and higher lows.
The points used to plot are along the highs of the price bars in a falling downward market. A downwards bullish move is defined by lower highs and lower lows.
The points used to draw are extreme points - the high or the low price. These extremes points are important because a close beyond the extreme tells investors the trend of the instrument may be changing. This is an entry or an exit signal.
The more often a trend-line is hit but not broken, the more powerful its signal.

There are 2 main ways of trading this setup:

The Bounce
Break

Analysis Methods

The bounce is a continuation signal where stock price bounces off this line to continue heading in the same direction. In a downward move, the market will bounce downward after hitting this technical level which's the resistance level. In an upwards move, the market will bounce upwards after hitting this level which's the support zone.

The break is a reversal indices signal where the market goes through the line & starts heading and moving in the opposite trend direction. When an up trend is broken then the sentiment of the market reverses and becomes bearish & when a down trend is broken then the sentiment reverses and becomes bullish.

For very strong trends, after this break signal, the price will consolidate for some time before moving in the opposite direction. For short term trends then this break signal will mean stock price may reverse direction immediately.

In stock trading analysis, both the bounce & the breaks that are used in trading analysis charts are based upon these levels being support & resistance.

Entry, Exit and Setting stop losses:

This method used to identify good entry and exit points, protective stop loss orders are placed just below them. The bounce is a low-risk entry method used by stock traders to place and open entry trades after stock price has retraced. Trade Positions are setup along these levels and a stoploss order placed just above/below.

The trend line break is a important indicator of potential reversal. When a trend its broken the price starts and begins to move in the opposite trend direction. This provides an early exit signal for investors/traders to exit their open trade transactions and take profits. When there is a penetration of these levels, it is a trading signal which the price can start heading in the opposite market direction.

Unlike other trading analysis trading indicators there's no formula used to calculate it, this pattern is just plotted between 2 chart points.

Learn More Topics and Guides:

Trade Stock Indices

Add Trend Line on Chart

Principles of How to Draw

Analysis Methods

Entry, Exit and Setting stop losses: