Profiting From A Simple Trend Line

by Richard Hill

It’s a new month...

A new month that could offer you brand new opportunities to profit.

All thanks to a simple black line.

You see, last time I introduced you the concept of trend lines.

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You saw how a trend line could be drawn on the EUR/USD 4 hour chart.

Hopefully, you saw that despite it sounding a bit complicated, it’s actually very easy to do.

In fact all you need to do is connect at least two high price points of the candle sticks, using a diagonal straight line...

That gets you a downward trend.

And once you’ve got that, we saw how it could give you a simple way to spot trade opportunities.

So, today, I want to show you how to actually plot trend lines using popular charting software...

How to plot a simple trend line on your chart

Now, I’m going to be using the basic IG Index chart to show you this.

Of course, most spread betting providers offer similar charting software for free...

If you don’t have an account, compare providers with Moneyweek’s spread betting comparison table.

But I personally find IG index the easiest.

With IG index you don’t actually have to deposit any funds to access the software. But obviously, you’ll need to if you want to place a trade.

So, having got your account, get yourself logged in.

First, you need to find ‘Spot FX EUR/USD’ on the ‘Popular Markets’ screen, and click on ‘quick chart’ by clicking the chart icon.

The chart should open up like this...

This is the default chart.

What you want to do here is go to the bottom left hand corner of the page and open the settings box.

You should see a load of options open up on the left like this...

This is where you want to change the style menu to ‘candlestick’ and ‘un-tick’ the MA (Moving Average) box below it.

Press settings again to close the box and click the ‘time’ box in right hand bottom corner.

A scroll bar of options will come up like below...

Highlight ‘4 hours’ to change the timeframe to 4 hour candlesticks as shown above.

Your chart should now look something like this...

Bingo, that’s your EUR/USD 4 hour candle stick chart.

Well done, you’re almost done.

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Now we’ve just got to plot the trend line...

So, click the third box in the top right hand corner which says ‘Draw Lines’ when you place the cursor on it as you’ll see below...

When you click on this you’ll see a crosshairs appear. You can move this by moving your cursor to the highest candle stick point as shown here...

Left click your mouse and hold it down whilst moving the black diagonal line into place.

You do this by connecting the high points as closely as possible with the diagonal line.

You might need to experiment a bit to get the feel of the software.

But once you’ve got it, keep the mouse button pressed down and move the cursor to the second and third high price points until the black vertical line is in place.

Take your finger off the mouse and the black vertical line (your trend line) will remain in place. You can see how it’ll look here...

Indeed, in this example, you can see I’ve connected three high points.

Hopefully you’ve got to this stage yourself and if so...

Well done.

You’ve just plotted your own trend line.

You can save your chart by clicking the ‘save present studies’ button in left hand bottom corner.

This means you can open this chart again next time you log into your account.

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Remember though, plotting trend lines is not an exact science and some discretion is involved in placing the trend line.

But they can help...

In fact, looking at my example above, can you see how the market heads lower when reaching the trend line level?

At the right hand side of the chart, the recent price breached the trend line slightly, before starting to head lower again.

This could throw up some serious trading possibilities and in the next issue I’ll show you how you can use a signal like this to place your own trades.

So, keep an eye out for Thursday’s Forex Round-Up.