How to spot market trends by reading charts? Get to know the Trend Lines Values... charts... lines... indexes. Financial analysis seems to confuse you? You think all those graphs are too complicated? Relax TRADING 212 is here to show you the simple steps to figure it all out. Let’s start with our first lesson in which we will show how to identify market trends. Learn how to draw the trend lines. The financial market is like a roller coaster. It has ups and downs and it certainly gives a strong adrenaline rush. Well,.. before you join the ride you need to be able to recognize the two types of trend lines: a resistance line and a support line. But how and where to find them? We will show you in the next few minutes. Have a look at the candlestick chart. Try to spot all the bottoms located on the same level. Simply connect them together and there you go – you have drawn a support line.Remember that you will need to have at least two bottoms touching the same line. Connect two or more peaks and what you have now is the so called resistance line. Easy, right?! Both lines keep the movement of the price within a range for a certain period of time until the price is strong enough to make a break. Once the price breaks through the top line, it's most likely to keep its upward direction. If the candle finishes its movement above the resistance line, it’s time for you to BUY. In this very moment the resistance line becomes a support line - a clear signal that the price is going up. Don't panic if the price drops for a few moments. It is only a FALSE BREAK and the price will certainly rise again.
Let’s see what happens when the price goes down. Looks like the same scenario is repeating, just in the opposite direction. The price breaks through the bottom line which is a signal to SELL. Now the support line becomes a resistance line. And again, don't freak out if the price jumps up a little bit. It is just another test of the line and the price is surely staying below this level. It’s good to know that trends can go up and down. Lines are not necessarily horizontal. You can have them looking just like slopes and hills. Let’s see how this works in practice! Simply log in to your account at www.trading212.com If you still don’t have one, register now. It’s free and takes only a few seconds. Now, that you are in our trading platform you can easily open an advanced chart with a single click on the icon. Then choose an instrument from the drop-down menu. In this example we use Gold. Now set a time period for your chart – let's pick ‘1 day’.
You can easily adjust your chart view by dragging the slider on the bottom of the page. Zooming it out helps you see the bigger picture. Then go to the toolbar and choose “trend line”. Connect two or more peaks together. Double click on the line to customize its colour and length. Now connect two bottoms by drawing another line and again double-click to customize its colour and length. There you go – you have the resistance line on top and the support line at the bottom. Keep in mind that there are exceptions in every rule. The examples we have provided do not cover 100% of the market scenarios but will certainly help you spot more trends and achieve higher returns. For more free trading tutorials check out www.trading212.com .
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