Why Do We Use Trend-Lines in Indices Trade?
Traders use trend lines in trading analysis because prices move in trends and the best tool to interpret these trend are the trend lines that are to indicate the direction of the trend either upwards or downwards.
Trend lines are also commonly used by traders because they are the most simple form of trading analysis that's used by many stock traders to identify where to open buy or sell trades.
Trend lines work by indicating the support zones of market prices or the resistance levels of market prices.
Trading prices move in a series of support & resistance levels & these series of support & resistance pattern then forms a general market direction either upward or downward.
Traders use trend lines to depict these patterns on the price charts as shown & displayed on the illustration explained below:
Minor Resistance/Support levels
In minor resistance & support areas the price will quickly form & develop these points in the shortterm and quickly move past these resistance and support areas during a trend.
Upwards Stock Trend: The upward trend pattern of this minor resistance and support areas will form a series/sequence of levels whose general direction is upwards.
Why Do We Use Trend-Lines? - How Do Trend-Lines Work?
Downwards Trend: The trend pattern of this minor resistance and support areas will form a series/sequence of levels whose over-all direction is downwards.
Down-wards Trend Series of Support and Resistance - Why Do We Use Trend-Lines? - How Do Trend Lines Work?
Traders then analyze these trend line using trend line trading analysis to identify when and where to open a buy or a sell trade position depending on the direction of the trend-line.
Study More Tutorials and Lessons:
- Stock Indices Trade Strategy is a Method That is Used to Interpret Indices
- RSI Index Classic Bullish Trading Divergence & Indices Classic Bearish Trading Divergence
- Short Term Indices Trade with Moving Averages
- Learn How to Trade Index Market Online
- How to Add Average True Range Trading Indicator on Stock Indices Chart in MT4 Software Platform
- How to Add Fibo Lines in MT4 Indices Charts
