Trading on the stock exchange and making money in Forex fascinates many business people who are versed in business and economics. In Forex, there is the concept of a "trend line", and due to the variety of definitions and interpretations of this term, plotting a trend line on a chart does not always correspond to reality, and is often subjective, leading to incorrect results. There is a way to build an objective trend line based on the method of Thomas DeMark.
Instructions
Step 1
Do not draw a trend line from left to right - since the current price dynamics is more important than the past one, the line should only be drawn from right to left, placing the most relevant price information on the right side.
Step 2
On the chart, you need to place points, called TD points, through which the TD lines will pass - the trend line itself. To draw a trend line, you also need to know about the pivot high and the pivot low.
Step 3
Downtrend lines are drawn through the pivot price high, which denotes the bar with the highest price higher than the highs of the bars in front of it and after it. Draw upward trend lines through the pivot price low - a bar whose price is lower than the low prices of the previous and next bar.
Step 4
Consecutively form two main points through which the line will pass, and plot them on the graph. Then draw a trend line through the selected points.
Step 5
To determine if you have drawn the line correctly, check several parameters. The pivot price low must be below the closing price of the previous two bars. In this case, the maximum must exceed the closing price for the previous two bars.
Step 6
The closing price of the next bar for the pivot price low should exceed the calculated value of the rate of rise of the trend line, and for the maximum, this price should be lower than the calculated value of the rate of fall of this line. According to these criteria, you will most accurately mark the required points on the chart, which means that you will get the most accurate and objective first-order trend line.
