Add Indices Trend Line on Stock Indices Chart

Sometimes support & resistances are formed diagonally in a similar way like a staircase. This forms a indices trend which is a sustained movement in one direction either upward or downwards.

A indices trend line depicts the points of support & resistance for the indices trading price, depending on the direction of the market. For an upwards moving market it will shows the points of support & for a downwards moving market it will show the areas of resistance and they are mainly used by many investors to determine these resistance & support levels.

Indices Trend-line is a straight line that connects 2 or more stock indices price points and extends into the future to act as a zone of support or resistance for the trading price movement. There are two different types: upward and downward. It is an aspect of stock indices technical analysis that uses line studies to try and predict where the next move will head to. A trader must know how to draw and interpret signals generated by this tool.

The basis of this analysis is based upon the idea that markets move in trends. They are used to show three things.

• The general direction - up or down.
• The strength of the current move - and
• Where future support & resistance will be likely located

If lines forms in a certain direction then market usually moves in that direction for a period of time until a time when it is broken.

Plotting these on a stock indices chart shows the general indices trend of the stock indices trading market which can either be upward or downwards.

Shown Below is example of how to draw these on charts

Course: How to Draw and Trade Upwards Move

Course: How to Draw & Trade Downwards Move

The MT4 software provides charting tools for drawing these on stock indices charts. To draw them onto a stock indices chart, investors can use the tool provided on the MT4 software that is shown below.

To draw on this on a stock indices chart just click the drawing tool above on the MT4 technical analysis software and select point A where you want to start drawing and then point B where you want the it to touch. You can also right click on trend-line and on properties option select option to extend its ray by checking 'ray check box', if you do not want to extend it, then uncheck this option in your indices trading platform. You can also change other properties such as color & width on this property popup panel of the properties. You can download MT4 software & learn technical analysis with it.

The indices trend is your friend. Is a popular saying among investors because you should never go against it. This is most reliable method to trade Indices because once stock indices trading prices begin to move in one direction they can continue to move in that particular direction for quite some time - therefore using this method presents opportunity to make profits from the stock indices trading market.

Principles of How to Draw

1. Use candlestick charts

2. The points used to plot are along the lows of the stock indices price bars in a rising market. An upwards bullish move is defined by higher highs & higher lows.
3. The points used to plot are along the highs of the stock indices trading price bars in a falling downward market. A downward bullish move is defined by lower highs & lower lows.
4. The points used to draw are extremes points - the high or the low indices trading price. These extremes are important because a close beyond the extreme tells investors the indices trend of the indices trading instrument might be changing. This is an entry or an exit signal.
5. The more often a trend-line is hit but not broken, the more powerful its trading signal.

There are 2 main ways of trading this indices trading setup:

1. The Bounce
2. The Break

Technical Analysis Methods

The bounce is a continuation signal where stock indices trading price bounces off this line to continue moving in the same direction. In a downward move, the stock indices trading market will bounce downward after hitting this level which is the resistance level. In an upward move, the stock indices trading market will bounce upwards after hitting this level which is the support level.

The break is a reversal stock indices signal where the stock indices trading market goes through the line and starts moving in the opposite direction. When an up indices trend is broken then sentiment of the stock indices trading market reverses and becomes bearish & when a down indices trend is broken then the sentiment reverses & becomes bullish.

For very strong trends, after this break signal, the stock indices trading price will consolidate for some time before heading in the opposite direction. For short term trends then this break signal will mean stock indices trading price might reverse direction immediately.

In stock indices technical analysis, both the bounce and the breaks that are used in technical analysis charts are based upon these levels being support and resistance.

Entry, Exit & Setting stops:

This method used to determine good entry and exit points, protective stops are placed just below them. The bounce is a low-risk entry method used by stock indices traders to place entry trades after stock indices trading price has retraced. Trades are setup along these levels & a stop loss placed just above or below.

The indices trendline break is a crucial technical indicator of possible Indices reversal. When a the its broken the stock indices trading price starts move in the opposite direction. This provides an early exit signal for investors to exit their open trades and take profits. When there a penetration of these levels, it is a signal that the stock indices price can begin heading in opposite direction.

Unlike other technical analysis indicators there is no formula used to calculate it, this pattern is just plotted between 2 chart points.