Trendlines as leading indicators

December 3rd, 2007 ForexKing Posted in FOREX TRADING STRATEGIES and CONCEPTS, FOREX TRADING ENTRY STRATEGIES |

Online forex trading concepts: leading indicators, trendlines, bearish and bullish lines, price patterns, non horizontal trendlines

One of the most used leading indicators is also the simplest indicator. So simple that people forget that it is a leading indicator. We are of course talking about the straight line.

The straight line when used as a trendline or used to identify a price patterns tells us where potential support and resistance will occur.

Example of a bearish (downward) trendline
Example of a trendlines identifying a price pattern
Another conception is that these lines need to be horizontal. They don’t. Non horizontal trendline occur way more than horizontal ones are in many cases more reliable.

Example of a horizontal trendline

Example of a non horizontal trendline
So why would we classify a straight line as a leading indicator. Any extension of a trendline becomes a future support or resistance barrier where the bulls and the bears will put up a fight as to whether the price will bounce or break through the support or resistance.