Trader's use all sort of different technical tools in their analysis. One of my favorites is Trendlines.
They can be very useful in determining entry points in a continuation of a trend, and at the same time, a great indicator for breakouts, reversals, and longer term pullbacks. Depending on which TF they are used, often longer term reversals can be spotted early.
However, this tool falls into the category of one that is subjective. A TL can be drawn different ways, and often subconsciously we draw them to support our bias.
Here is a great example of the GBPCAD
Figure 2 - Bullish breakout from down channel
As you may have noticed, they are the same chart. But depending on how the analysis is drawn, it paints a different picture.
As of late, when I have determine I want to short a pair, I try to analyze it in a bullish perspective, and vice versa, just to get both sides of the picture. It helps to see both sides to determine which seems more likely.
Another things I've found that helps, is looking at other pairs. In this case looking at the CAD against other pairs, and the GBP against other pairs, to see if there are any other similar signals. Looking at multiple charts can help get the conviction level higher in the trade prior to pulling the trigger.
They can be very useful in determining entry points in a continuation of a trend, and at the same time, a great indicator for breakouts, reversals, and longer term pullbacks. Depending on which TF they are used, often longer term reversals can be spotted early.
However, this tool falls into the category of one that is subjective. A TL can be drawn different ways, and often subconsciously we draw them to support our bias.
Here is a great example of the GBPCAD
Figure 1 - Rejection from top of channel in a downtrend
Figure 2 - Bullish breakout from down channel
As you may have noticed, they are the same chart. But depending on how the analysis is drawn, it paints a different picture.
As of late, when I have determine I want to short a pair, I try to analyze it in a bullish perspective, and vice versa, just to get both sides of the picture. It helps to see both sides to determine which seems more likely.
Another things I've found that helps, is looking at other pairs. In this case looking at the CAD against other pairs, and the GBP against other pairs, to see if there are any other similar signals. Looking at multiple charts can help get the conviction level higher in the trade prior to pulling the trigger.
