Trends and Trendlines | Uptrend Examples
Support and resistance, trends, trendlines, price swings, these are the basic tools of the forex trader. We always want to trade with the trend. Going against the trend is like trying to swim up-current. It’s much easier to go with the flow. This blog post will show you how to spot trends in the forex market.
Trendlines are an important tool in your toolbox as a Forex analyst and trader because they project price levels where the market is likely to bounce.
If you can draw trendlines correctly you will be able to define buy and sell zones and maximize your trading potential.
Both uptrends and downtrends can be defined by three primary trendlines: the inner trendline, the outer trendline, and the outer long-term trendline.
Finding your inner, outer, and long-term outer trendlines in an uptrend
An uptrend is a series of price swings where the market is making higher highs and higher lows. Just as there are trends inside of trends, there are price swings inside of swings.
An uptrend price swing starts at a low and ends at a high.
Price swing in an uptrend
In an uptrend, the market is making higher highs and higher lows (as prices increase overall).To draw a trendline when the market is in an uptrend, draw a line across the lows.
Remember: “the trend is your friend until it bends.”
In any trend, there are three main trendlines: the inner line, the outer line, and the long term outer line.
To draw a trendline in an uptrend, draw across all levels of support.
If you have identified that the market is in an uptrend (the market is making higher highs and higher lows), you should draw all three of your trendlines before making a trade.
To draw the inner upward trendline, locate the last two levels of support (beginning from the current market price at the right of the chart) and draw your trendline between those two levels, extending it forward and up to the right.
Next, draw your outer upward trendline. First locate all your levels of support. Then, starting from the left side of the chart, draw your trendline between all the levels of support, extending the line forward and up to the right.
You will find that if when the market breaks the inner trendline, prices generally move to the outer trendline.
Drawing the Third Trendline
To find the third trendline, the long-term outer trendline, you will need to switch your chart to show a longer timeframe. For example, if you locate your inner and outer trendlines on a 60-minute chart, switch to a daily chart to locate your long-term outer trendline.
Once you are looking at a longer time frame, drawing your outer long-term trendline is the same as drawing the outer trendline: after locating all your levels of support, start from the left side of the chart and draw your trendline between all those levels, extending the line forward and up to the right.
Just as the market will likely move to the outer trendline if the inner trendline is broken, so will the market likely move to the long-term outer trendline if the outer trendline is broken.
The principle behind the three types of trendlines is this: there are trends inside of trends. The market moves in swings, which viewed over a long period of time are long and slow moving. But there are other swings that exist inside of those market swings, and they can be found within shorter time periods. For example, you will be able to identify price swings (trends) looking at a daily chart that are not very volatile (the swings are, once again, long and slow moving).
Looking at the same currency cross on a 60-minute chart you will see trends that are more volatile (the swings are shorter and move more quickly). The smaller your time frame, the more swings you will see.
Three trendlines help you see important support levels
Trading trendlines in an uptrend
To trade the inner upward trendline, buy when the market hits the inner upward trendline. Set your protective stop loss order (as always) at the last level of support. To trade the outer or long-term outer trendlines, buy when the market hits the outer upward (or outer long-term upward) trendline, setting a protective stop loss order at the last level of support.
You will sometimes see the inner and outer trendlines converging. This convergence is like a double or extra-strong signal, offering you two hints that the market will bounce. In this case, buy when the market hits the inner and/or outer trendline setting your protective stop loss order at the last level of support.
Now you’ve been introduced to uptrends. In my next post, I’ll show you examples of downtrends.
Related posts:
- Downtrend Examples | Lower Lows and Lower Highs
- Rules for Trading Trendlines
- Trading Currencies when the Downtrend Breaks
- Currency Trading Buy and Sell Zones
- Trading Rules for Support and Resistance
Tags: price swings, swing, trendline, trendlines, uptrends Posted in
Rapid Forex on 
Philile on 
Gary Cooper on
March 11th, 2010 at 5:00 pm
I’ve seen one trendline drawn before. I never thought about drawing multiple trendlines. Is it possible to draw more?
[Reply]
Rapid Forex
Reply:
March 18th, 2010 at 8:22 pm
Tony,
That’s a great question, thanks for taking the time to ask it!
Technically you can draw as many trendlines as you can see. At one point though you’re probably just really cluttering up your chart. Most of the time 3 will be fine. Many times one good trendline will be enough.
It’s not necessary to get caught up in drawing too many trendlines. The lines are simply there to help you see the direction of the trend. This is something that you can/should see before drawing any lines at all.
But if you want, you can certainly draw as many lines as you like (especially if they look cool on your chart
)
[Reply]
March 12th, 2010 at 4:49 pm
I’ve been playing with trend lines in my demo account forex charts.
Am I right that they seem subjective? It looks like I could draw the lines a few different ways based on your rules.
[Reply]
Rapid Forex
Reply:
March 18th, 2010 at 8:29 pm
Preston,
Yes, they are subjective. If I look at a chart & you look at a chart, our trendlines will be slightly different (they shouldn’t be radically different though). Trendlines are meant as guidelines for you to understand the direction prices are moving in. As you get more experience, you’ll feel more comfortable drawing trendlines. For now, just try to make them as good as you can and things will work out fine for you.
[Reply]
March 13th, 2010 at 4:35 pm
Dang Brian!
Are you trying to create an online forex trading encyclopedia? You’re covering a lot of ground posts.
You mentioned that you were going to create some videos somewhere else on the blog. I’m curious that will be.
I’m enjoying the blog. I’m glad you’re back in the forex world Brian!
Happy
Jeff
[Reply]
April 8th, 2010 at 1:26 am
Wow at the trends?!?
[Reply]
April 20th, 2010 at 6:48 am
is there another way to see how you draw the trendlines you have mentioned, I just don’t understand it (and probably is very easy) and the image of the graphs you have shown here is not big enough for my eyes to see.
I consider my self more a swing trader that a long term trader, and I guess that forex sailing is something in the middle, so that is just the system I need, swing trading and long term trading, is very profitable, but in my case I think you need a big enough account to sustained the drawdowns in the market (big price volatility) and maybe there are a lot of trading oportunities in the short term that Im just not confidence enough to trade and I keep missing. is that right? Im just leveraging your great brain my friend
[Reply]
Rapid Forex
Reply:
April 20th, 2010 at 6:49 am
@Francisco – I’ll be showing plenty of more live examples in the Forex Sailing videos, which will be released after this series of blog posts is complete. It should be ready by the end of April. On my more recent posts, you can click on the images and see them in larger detail.
[Reply]
April 20th, 2010 at 1:40 pm
I am looking forward to watching the videos, do you give a notice by email?
[Reply]
Rapid Forex
Reply:
April 20th, 2010 at 1:41 pm
@Kulvadee – yes, the videos will be announced through email 5 minutes after they are ready
[Reply]
April 22nd, 2010 at 5:43 am
Hello my friend
As I was trying to understand how to draw the trendlines you mentioned, and trying to figure out the graph image (even if you zoom in , text is not legible) I finaly got it!! and it makes a lot of sense, the first thing that came to my mind about this trendlines is not just about getting and entry signal, but even most important is when to stay out of the market on any given currency cross.
all the really good things that I’ve had learn in this forex journey helped me do this, if all your system signals are not ok to go, JUST STAY OUT!!, and doing this I believe is harder than placing losing trades.
[Reply]
April 24th, 2010 at 3:25 am
brian said:”To trade the inner upward trendline, buy when the market hits the inner upward trendline”.
But when the inner upward trendline is hit (broken) that doesn’t mean that the inner trend is finished?
[Reply]
April 27th, 2010 at 7:25 pm
I find it very hard, to trade Forex, I follow the trend, but it goes up and down sometimes, so when want to stay in, and put a very low stop loss, it hits it and I loose a lot of money. I like to find a software which can help us. more. So far I have no found any. I am so willin to learn, I may have to join a school. What do you say?
[Reply]
April 28th, 2010 at 4:57 am
@bogdan-You cannot know in advance if price hitting the inner trend line (or any other trend line) means that trend is ending and there is a reversal coming. Sometimes price bounces off the trendline, and sometimes it breaks through and keeps going. The trend line hit should be used with other tools to help you decide if you will treat it as a bounce and enter a trade with the trend, or treat it as a reversal and trade in the other direction.
[Reply]
April 28th, 2010 at 5:53 pm
Did I miss where you look at charts? Do I need a chart service?
[Reply]
October 10th, 2010 at 7:24 am
thanks brian
[Reply]
December 30th, 2011 at 9:04 pm
Thank you very much for plane and clear explanation on 3 trendlines. Is there perhaps indicators that can precisely draw this 3 trendlines on all timeframes.
Please let me know because I am curious about trendlines.
[Reply]
Rapid Forex
Reply:
January 9th, 2012 at 11:07 am
@Gert – There aren’t any indicators that will draw trendlines, but there are tools for drawing trendlines. Any forex charting software will allow you to draw trendlines. You get charts free with any broker account. Here are 5 tips for choosing a broker.
[Reply]