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خط روند در ارز دیجیتال

A trend line is a line that is easily identifiable and is drawn on a chart by connecting a series of price points (candles) in a specific time frame. The resulting line will show the general direction of the asset’s value in which it is likely to move in the near future. Recognizing the trend of the digital currency market is necessary for the probability of success in a transaction.

Identifying and correctly drawing the trend line is the first task to start trading. In fact, this line is the first tool used in technical analysis; Not only because of its simplicity, but because its results are accurate in predicting future price movements. Therefore, using various types of trend lines in technical analysis is one of the best solutions for traders to predict market conditions and determine the entry or exit strategy.

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the writer: Thomas Myers

Translation and adaptation: Farhad Moghadam Salimi

Types of trend lines include; It ascends and descends and becomes neutral or sideways. If the trend is up, the market is bullish and if the trend is down, the market is bearish. If the trend is to the side, we call the movement neutral or sideways. To detect the trend of the digital currency market, we use the trend detection indicator and the trend tool.

In the rest of this article, I will explain to you the concept of types of trend lines, types of trends in the forex market and the validity of the trend line, and I will explain the method of identifying the trend of the digital currency market.

What is the trend line?

The concept of trend line is a concept that shows the direction of movement of shares or crypto. In fact, by connecting a series of candlesticks in a specific time frame on the chart, the general direction of the asset value in the near future can be determined. Drawing a trend line somehow helps you understand what kind of trend you are dealing with in a certain time frame, whether it is an upward, downward, or sideways trend. If the prices are increasing in the general direction without taking into account the fluctuations, the trend line is ascending and moving upwards. On the other hand, if the prices are decreasing, the trend line will be downward and the market will move downwards.

Basically, trend lines act like resistance and support levels, but they are made of diagonal lines instead of horizontal lines. Therefore, every trend can have a negative or positive slope. The greater the slope of the line, the stronger the trend. Also, the more the trend is established in a higher time frame, the more valid it is and the more important the price reaction is.

انواع خط روند

Types of trend lines

Trends play a vital role for traders, and the ability to recognize the trend of the digital currency market, recognize the end of the upward trend and break the trend line and use it in trading can be of great help to traders. In general, the types of trend lines include upward trend, downward trend, lateral trend, which are explained below:

Uptrend line

An uptrend line is formed when we face an increase in the stock value of a trade. For example, if the price of ethereum increases by 3 dollars and decreases by 3 dollars in the same period, and then increases by 5 dollars again, the future trend will be upward.

Downtrend line

The downtrend line is the opposite of the uptrend. A bearish trend is formed when the stock value of the transaction decreases. For example, if the price of ethereum drops by $3 and increases by $3 in the same period, and after this ups and downs, the next candle is accompanied by a drop of $5, the formed trend is bearish.

Sideways trend

A lateral trend line is formed when the market remains stable in a horizontal range. This means that the price does not form a lower floor or a higher ceiling. Some traders don’t pay much attention to the sideways trend; However, lateral trends play an important role in scalping trades.

خط روند اصلی و فرعی

Main and secondary trend line

An uptrend can consist of many downtrends. On the other hand, the downward trend will also consist of a large number of upward trends. In the market, every upward movement will be followed by a downward movement and every downward movement will be followed by an upward movement. The prevailing ups and downs are called the main trend (Trend or impulsive movement) or the main stock movement. On the other hand, we have movements that are partial and are created within the trend; these trends are the opposite of the main trend and are called secondary stock movement (Correction or Corrective Movement). Sub-trends or corrections do not have a special effect on the upward trend, and they are simply referred to as corrections.

For example, to better understand corrections, imagine a climber climbing a mountain. This person may rest in places along the way and then continue climbing again. In general, we can say that we never have absolutely upward or absolutely downward movement.

How to draw different types of trend lines on a chart

Maybe so far in the discussion, the question may be raised for some people, whether it is possible to recognize the size of the correction to some extent? Or which trend lines are important for digital currency prices and which ones should be ignored?

The amount of correction is usually one-third, one-half, and two-thirds of the main trend. If the correction value exceeds this value, we say that the main trend has changed. In other words, with the beginning of the upward movement and at the time of creating a correction, in the first place, about one third of the amount that went up will come down and make a collection. In the next stage, it will decrease by half and in the next stage, by two thirds. This abstract is available in all available tools, such as El View software, Trading View, etc.

To correctly draw a trend line in technical analysis, you must first focus on the main swing waves and ignore other waves. Then connect at least two main waves together. Draw the desired line in such a way that it has the highest number of collisions with the price chart. These lines act as dynamic resistance and support levels. This means that unlike static support levels that can only be drawn once, the trend line needs to be reset.

The Fibonacci Retracement tool is used to complete the collection and create a new position in the Elview software. Of course, the trend tool can also be drawn on the chart by hand. In the ElView tool, it is enough to specify the beginning of the analyzed trend and then the end of the trend and say that this trend is an upward trend and our share or chart has moved up.

ترسیم خط روند صعودی در Trend Line

Drawing an upward trend line in the Trend Line

An ascending trend line is a straight line that stretches up and to the right. This line connects two or more floors (Low). At the time of drawing the upward trend line, the second floor should be higher than the first floor (Higher Low). An uptrend line acts as support and indicates that even as the price rises, demand is greater than supply. As long as the prices remain above this line, the upward trend is considered.

The failure of the price below the upward trend line indicates that there is a possibility of a change in the trend. In the upward trend, the market price will reach a higher high and a higher low. The upward trend actually indicates that investors have positive behavior and feelings towards the market.

ترسیم خط روند نزولی در trends line

Draw a downward trend line

A downtrend line is a straight line that goes down and to the right. This line connects two or more roofs (High). The height of the second ceiling should be lower than the first ceiling (Lower High) so that the trend line has a downward slope. These lines act as resistance and indicate that even as the price declines, supply is greater than demand.

As long as the prices remain below the trend line, the trend is considered bearish. The price breaking above the downward trend line indicates the possibility of a change in the trend. In the downward trend, market sentiments are negative and many investors sell their assets and so-called bear market occurs.

The importance of Trend Line in technical analysis

Trend Lines help to identify trends (upward, downward, and sideways), recognize support and resistance levels, and define optimal levels in order to control financial risk management (such as determining loss limits or profit taking).

Also, most traders predict the price of a digital currency in the future by recognizing the trend of the digital currency market and recognizing the end of the upward and downward trend and identifying the entry and exit points of the market. In fact, by analyzing the trend, traders first identify the upward or downward trend and then follow it until the data shows the reversal of the trend. Trendline analysis is very important due to the opportunity to make profit for investors by following the movement of trends.

Despite the importance of the trend line, these lines should not be considered as an independent strategy and indicator for trading. Because Trend Line and its analysis is only one of the available tools and techniques. Traders should combine the trend detection indicator with other technical analysis indicators (Fibonacci levels, moving averages, Ichimoku cloud, volume measuring tools, etc.). A trend line break is only a warning that the trend is likely to change. In order to confirm the trend change and gain more confidence, more tools and signals should be used.

راهنمای تشخیص روند بازار ارز دیجیتال با کمک خط روند

A guide to identifying the trend of the digital currency market with the help of the trend line

The most effective way to detect the digital currency market trend is to draw trend lines. For this purpose, you should draw the trend line and ask yourself if the trend line is below the price chart or above it? If the trend line is below the chart and supports the price, the market is in an upward trend. On the other hand, if the trend line is at the top of the chart and plays the role of resistance, it is a downward trend.

Of course, this is not the whole story and the trend line can also give you a warning about changing market conditions. In such cases, based on the slope of the trend, consider the following modes:

Trading strategies and trend detection indicator

Now that you are familiar with the concept of the trend line and the types of trend lines in technical analysis, I want to give you some examples of trend detection indicators that many traders use:

شاخص معاملات MACD در خط روند

MACD trading indicator

The Moving Average Divergence or Convergence (MACD) index finds the average price of a digital currency in a certain time period in order to help traders identify trends. The MACD indicator is a type of applied trend detection indicator. When the short-term moving average exceeds the long-term, traders enter a long position in a certain period of time. However, if the short-term moving average crosses the long-term, these people can enter short positions.

Traders often combine moving average trends with other trend detection indicators to determine trend lines by filtering signals. Moving averages play an important role in helping with this type of analysis.

نشانگر ADX در خط روند

ADX indicator

ADX indicator helps traders to measure the strength of traders. Also, with this indicator, traders can estimate the strength of the price of the currency they are considering in both positive and negative directions. The line on the ADX trend detection indicator is changing between 0 and 100. If this indicator shows values ​​from 25 to 100, it indicates that a strong trend is forming. While if the values ​​fall below 25, it indicates the formation of a weak trend.

شاخص معاملاتی RSI

RSI trading indicator

The Relative Strength Index (RSI) is a strategy to help identify currency price movements and buy and sell signals. The indicator (RSI) determines the positive and negative movement of the price in a certain period of time by observing the average profit and loss. (RSI) is displayed as a percentage that ranges from 0 to 100 on a scale.

Types of trend lines do not tell all the events of the market!

Although trend lines play an important role in technical analysis, many believe that the analysis of these lines does not tell all the market events. Because every time frame in the market, whether in one second or in several days, has valuable data. In addition, checking trend lines is often done based on the past price of a cryptocurrency, and predicting the future with its help is difficult and risky. Also, the feelings of users in the market as one of the fundamental factors affecting the price of Bitcoin and other cryptocurrencies can change the price trend of currencies in general.

Experts believe that trend line analysis alone cannot meet the needs of investors and fundamental analysis should also be considered.

اهمیت حجم در تایید روندهای صعودی و نزولی

The importance of volume in confirming bullish and bearish trends

So far, we have learned about the concept of trend line in technical analysis. The important point here is that we may determine the trend in the market, but to confirm our diagnosis, we need a tool such as the volume of transactions. According to Mr. Charles Henry Dow’s opinion, trading volume is a secondary but important factor in confirming the warnings obtained from price analysis.

In general, keep in mind that the trading volume should be in line with the direction of the main trend. This means that in the upward trend, the ascending waves lead to an increase and the descending waves lead to a decrease in volume.

The decrease and increase in the volume of transactions in the downward and upward waves should confirm the upward trend .

On the other hand, in a downward trend, ascending waves are accompanied by a decrease and descending waves are associated with an increase in volume .

The decrease and increase in the volume of transactions in ascending and descending waves should confirm the downward trend .

The important thing is that based on the comments of users, many consider the above sentences to be incorrect. This is due to the confusion of the words trend and wave. It is easy to understand these words in an upward trend. For a better understanding, you should note that in order to have a downward trend, the activities of the sellers will increase in the downward waves and thus the volume of sales transactions will increase. In the ascending waves, the activity of sellers will decrease and thus the volume of sales transactions will decrease. Therefore, the image and words of trend and wave should be paid much attention.

Difference between trend lines and channels

In technical analysis, price channel and trend line methods are used to identify potential price movement paths and trends in financial markets. But these tools have different interpretations and uses. Trend lines are horizontal lines that connect at least two higher floors or two lower ceilings in a price chart, depending on whether they are descending or ascending, and indicate the direction of the overall movement.

Also, the trend line is used to identify support and resistance levels and help traders make informed decisions to buy or sell assets.

On the other hand, channels consist of parallel lines that contain price action within a trend and indicate potential reversal points and range of fluctuations. In other words, the price channel is drawn by two parallel trend lines around the price action of a currency. In this case, the upper trend line that specifies the ceiling points and the lower trend line that represent the bottom points of a trend are connected. Channels are used to identify the possible range of price movement.

Therefore, in summary, both trend lines and price channels are used to identify trends in the financial market; But the price channel, while identifying potential entry and exit points and support and resistance levels, also specifies the price fluctuation range and is more complicated.

The trend in forex is generally said to be the price of a currency pair moving in a certain time frame, and this represents the dominant movement of the value of one currency compared to others.

By examining the trend line in forex, you can determine the direction of price, market sentiment, risk management, trading opportunities, market psychology, long-term outlook, setting strategies, risk-to-reward ratio, confirmation through indicators, volatility and timing, etc. found out

If you see a break of the trend line, it should be considered as a warning, which indicates that there is a possibility of a trend change. To confirm this change, more signals and tools should be used to provide the necessary assurance.

The trend line is actually confirmed by the third collision with the price line, but it is also possible to draw the trend line with only two collision points. As the number of hits increases, the validity of the trend line increases.

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Farhad Moghadamsalimi

Hey, I’m Farhad. I’m an entrepreneur, Blockchain and AI enthusiast, and web developer living in Turkey. I am a fan of entrepreneurship, writing, and reading about Technology and philosophy.

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