The trendline is a very practical tool that you can find on the Olymp Trade platform. The main purpose of it is to trace the price movements along with the trend. This tool is a graphical feature, which only means it won’t appear automatically. You will have to draw it by yourself. But as difficult as it may sound at the beginning, with this guide, soon you will master using the trendline.
Note: Here we will show you how to use the trendline while trading uptrend, yet it is no different while trading downtrend. Simply use the rules we will teach you here.
We have already mentioned that the purpose of drawing the trendline is to trace the price changes. But it only applies to the current trend. It supposed to connect higher-lows in an uptrend. When speaking of the downtrend, it will naturally join lower-highs. Now let’s explain the basic terms.
Uptrend – basic terms you might need to be familiar with.
UPTREND – This is the first concept to grasp. It basically means growth in prices. The market is dominated by bulls what is shown on the chart by evolving longer bullish candles (green colour). The peaks are higher along with the prices rise. In the following diagram, you can see that the peaks 2 and 4 are progressively higher.
CORRECTION MOVEMENT – Uptrend doesn’t necessarily mean that sellers are not active. In fact, they undertake efforts constantly to reduce prices. And it causes price fluctuations. When they manage to gain control over the market the prices will have to drop. And this is exactly what we call correction movement. But soon buyers will jump in taking the market over and the prices will rise again.
In the scheme that follows, the correction movement is visible between point 2 and 3. Number 2 indicates the movement when the buyers are the most active part. Nevertheless, the sellers aren’t far from the sight and they are lowering the prices until they reach point 3. During this time, buyers still operate and at the end, the price changes again going up and reaching point 4.
Keep always in mind, that the correction movement will appear in every trend. When we are observing uptrend, you might notice some bearish candles among bullish ones. Those correction areas create support and resistance levels throughout the trend.
How to use the trendline while trading on the Olymp Trade platform.
To use the trendline you will have to draw it on the chart. To do that, open the Japanese candle chart first. Choose 1-minute interval candles. Then you hit the graphical tools function and pick the trendline. Now you can draw your trendline, exactly the way we did on the diagram below.
Which moment is the best to enter the trade while using the trendline on Olymp Trade?
Look at the chart beneath.
The trend shown here is the uptrend with peaks marked as numbers 2, 4, 6, 8 and 10. As you already know, those are the points of corrections. The price slightly drops just to go up one more time. It is not advised to enter a trading position at these levels. This would require that you enter a sell position, and yet, the uptrend continues.
It is recommended to enter a buy position at points 3, 5, 7 or 9 when the price is significantly lower. Bear in mind that the trend is likely to reverse at some point in the future. Your trading positions should be more short-term with the development of the trend. So if you succeed in placing a position at point number 3, your long position should be carried out for a significantly longer time than if you enter at points 5 or 7.
Using the trendlines can be beneficial for achieving your goals. It is quite simple to draw them on the chart. They will help you to identify a true trend.
Go ahead and try this tool immediately on your Olymp Trade demo account. After a bit of practice, you are ready to use it with real money. Remember, we would be glad to hear from you, whether you met any obstacles on the way or you got it straight away.
Best of luck!
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