Lesson 12: Trendlines Support and resistance lines can be not only horizontal but also diagonal. Diagonal support and resistance lines are called trendlines and they are drawn by connecting two or more price peaks or bottoms. Trend-following is one of the most basic and profitable trading strategies. If a currency pair is in an up-trend, traders wait for the price to approach its trendline - and if it acts as a support, they buy once the price bounces beyond that level. Conversely, if the price is trending down, traders wait for it to approach its trend line as the resistance - and sell after it bounces. Remember; the more times support and resistance levels have been tested, the stronger they get. The same goes for the trendlines. The biggest problem with trendlines is that unlike horizontal support or resistance they can be very subjective. Tell 5 different people to draw a trendline, and you will get 5 different trendlines. A trend channel is another great tool for a trend trader. In order to make a channel, all you have to do is draw a line parallel to your trend line. Channels are great for setting your price target.
You just went long after the price bounced from a rising trendline but you didn’t know where to take profit. By drawing a channel, you can project how high the price is going to rise, and based on it, you can calculate your target profit.