The trend is your best guarding point in any financial trading market, as they say, and using a technical analysis chart for trend based trading is a simple method that at the same time can be very successful. Many traders over complicate the markets, especially at the beginning of their trading career. In fact simple systems can be the most effective.
Most traders use candlestick charts for this purpose, because they are so clear. Bar charts can also be used if preferred. Line charts would not be used.
The first thing to taking in to count is whether the market is rising or falling. This should be visible at a glance, especially if we check several time periods. Use an indicator like Bollinger Bands to make sure that a rising market is not overbought, or a falling market oversold. Once we have this information, which should just take a few seconds to verify, we can begin to draw trend lines on our technical analysis chart. Here’s how.
First, draw a straight line through the highest highs and another through the lowest lows.
1. Bullish market
If the two lines are approximately parallel and heading upward, there is an indication of upward trend. The two trend lines can be used as support and resistance lines, which means that we assume the price will remain within the area between the two lines while the trend continues.