Article courtesy of Oracle Trader

It is widely known in the currency trading world that the trend is your buddy and any forex trading methodology based around following a trend is probably going to be both easy and effective.

Step one in using trend lines for a currency exchange currency trading technique is to establish whether the market is rising, falling or is stable inside certain parameters. If the price is rising

If the price is going up, first draw a straight line through the highest highs on the chart. This line will be sloping upward. Then draw another line thru the lowest lows on the chart. If this line is also going upward and is approximately parallel to the first, you’ve got an rising trend.

You can then use these 2 lines as support and resistance lines. This means that you can assume that while the trend continues, the price will remain in the area between these two lines. Therefore , any time the price hits the top line you could sell, on the presumption that it will fall back. In a way this strategy means going against the trend, but you would only hold that position for a short time. In this case you are following the trend which is frequently a better methodology. However, you may bear in mind that there will at some point be a real reversal and you could be caught out by this.

2. If the price is falling

If the price is going down, you can follow a corresponding strategy to the previous system.