Why Use Trendlines?
Trendlines can be used for many different purposes:
Directional indicators: Peaks or troughs over a particular period may be joined with a trendline to identify the general direction. For example, if the trendline is a downward sloping line and the curve breaks the trend by rising above the line, this might be seen as a buying opportunity. Conversely, if the trendline is an upward sloping line and the curve breaks the trend by dropping below the line, this might be seen as a selling opportunity.
Support and resistance lines: When the price goes below trendlines horizontally drawn across previous lows, it may be a selling opportunity. Conversely, when the price goes above trendlines horizontally drawn across previous highs, it may be a buying opportunity.
Channels: If the currency price line stays between two parallel lines connecting peaks and troughs, this is a "channel" where fluctuations are "range-bound." If the currency price breaks out of this channel, it could be considered a signal of a change in direction.
This is for general information purposes only - Examples shown are for illustrative purposes and may not reflect current prices from OANDA. It is not investment advice or an inducement to trade. Past history is not an indication of future performance.