If you have been following my articles and videos for a while, you noticed that I am trend follower. This is because following the dominant market trend give us huge potential profits. There are many ways to identify a trend and today we will learn one of the simplest yet practical method: the old-fashioned trend line.

What is a Trend Line? 

A trend line is a straight line that connects TWO OR MORE candlesticks' points from the left hand-side of the chart and then extends out to the right, which is the future. This method is popular because it helps us traders to identify what the current trend is. In addition, it also helps us identify support and resistance zones for us.

What timeframe to draw the quality trend line on? 

Now that we know how beneficial a trend line to us, it does not mean we can simply open up a chart to identify it. First, we need to find a suitable timeframe to draw our it. I usually draw trend lines on the 4-hour and daily chart timeframe as well. This is because these 2 timeframes help us identify:

1) dominant market trend, and

2) eliminates market noises & volatility caused by smart monies's big trades.

You can choose to draw it either on the 4-hour or daily chart. Both can get the job done. Keep in mind, the daily timeframe offers an even higher reliability than 4-hour. It is not recommended to draw trend line on 1min, 5min, 15min, 30min and 1hr because those charts are full of market noises.

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How to draw a Trend Line?

Now we know which timeframe to use on, let us move on to the fun part: identifying & drawing it!

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The best way to draw a trend line is to connect at least 2 points of candlesticks' lows if you want to identify an uptrend. Then you connect 2 obvious price points and draw towards the right. Voila! Now you know what is the dominant market trend and also what are the projected support level for this uptrend. Check out the FKLI chart below, from the trend line that you found from low no.1 and no.2, you noticed that FKLI subsequently rebounded near during the month of June.

Conversely, if you want to identify a downtrend, you just need to connect at least 2 points of the candlesticks' highs. The more highs points you can connect to form a trend line, the more stronger and reliable it is. Looked how reliable this FCPO downtrend line it is when you able to connect high no.1, 2 and 3 together. When FCPO reached that it around no.4, it then unable to break above it and subsequently FCPO continue its downtrend again.

PRO TIP: Best practice is to have a trend line that touches more than 2 lows (for uptrends)/ highs (for downtrends), as this will show that the dominant market trend is very strong!

Some of you might ask: can we identify trend lines by connecting the candlestick's close? Good question. Unfortunately the answer is no. This is because closing prices do not give us a reliable trend line. Case in point, check the FCPO chart below. If you have connected a series of closing, you would either get the white color or the red color trend line. Both will give us false uptrend signals and thus cause unnecessary losses to your account.

Practice to get the quality trend line

Whenever you have learned a new technique, it is best for you to have more practice on it. Likewise to this technique here today. Besides that, try finding trend line(s) on a naked chart. So the more time you spend on identifying it, the better you are at identifying quality trends & trade ideas.

If you want to learn more advance techniques to improve your skill on analyze FKLI & FCPO, Feel free to check out our Intensive TFM Futures Program! 

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