| When searching for Forex information on the internet | | | | Drawing Trendlines In A Downtrend |
| you are likely to find articles relating to trendlines and | | | | |
| trendline analysis. | | | | 1. Examine the tops of the candles on your chart and |
| Tom DeMark is a specialist in the field of technical | | | | identify the most recent candle wick that is higher |
| market analysis and his best-selling book "The New | | | | than the candle wicks to the immediate right and left |
| Science of Technical Analysis" released in 1994 spells | | | | of it. |
| out some innovative techniques when it comes to | | | | 2. Look left on the chart, and identify the previous |
| the use of trendlines. | | | | high candle that has candle wicks lower to the |
| Much Forex information on the internet is of a | | | | immediate right and left of it which is higher than the |
| general nature, and many articles are written about | | | | current high candle. |
| Forex by individuals who are not traders themselves. | | | | 3. Now draw a line from the current highest candle to |
| Tom DeMark on the other hand has had a long | | | | the previous highest candle (drawing from right to |
| career with institutions trading stocks, futures, | | | | left). |
| currencies and options. | | | | 4. Now take the end of the newly drawn line which |
| His guidelines on the use of trendlines are very | | | | stops at the current high candle and extend it |
| specific and they can be helpful to the newer trader | | | | forward some distance (drawing from the present |
| who is searching for reliable Forex information on | | | | position to the right). |
| how to use standard indicators. | | | | You have now drawn a Tom DeMark trendline. |
| Here is a brief step-by-step description of how to | | | | This can now be a reference point for future price |
| draw DeMark trendlines: | | | | action. It will often be observed that price will come |
| Note: The term swing high and swing low (also called | | | | and check this level. If it breaks through, it can mean |
| cycle high and cycle low) refers to the following: | | | | a change in direction, the significance of which will |
| In An Uptrend: A swing high is the wick of a candle | | | | depend on the time frame being used. |
| that is higher than the wick of the candle to the left | | | | Trendlines drawn on 5 minute or 15 minute charts |
| and right. | | | | have much lesser significance than trendlines drawn |
| In A Downtrend: A swing low is the wick of a candle | | | | on higher time frames such as the 1 hour, 4 hour, or |
| that is lower than the wick of the candle to the left | | | | daily. |
| and right. | | | | Caution Required |
| Obviously the more candles to the left and right that | | | | Much Forex information extols the virtues of |
| are higher in a swing low or lower in a swing high | | | | trendlines as an indicator of possible future price |
| makes the swing or cycle more significant. | | | | action. |
| An uptrend is where price is making higher highs and | | | | Mr. DeMark certainly has made this a science and his |
| higher lows. A downtrend is where price is making | | | | detailed approach to drawing trendlines is certainly |
| lower highs and lower lows. | | | | more accurate than just drawing general trendlines |
| Drawing DeMark Trendlines | | | | along the bottoms and tops of trends according to |
| Drawing Trendlines In An Uptrend | | | | the way the eye sees. |
| | | | However, trendlines in themselves do not indicate |
| 1. Examine the bottoms of the candles on your chart | | | | where high probability trades can be taken. |
| and identify the most recent candle wick that is | | | | It is important to use a variety of indicators before |
| lower than the candle wicks to the immediate right | | | | pulling the trigger. Examining previous levels of |
| and left of it. | | | | support and resistance is probably far more significant |
| 2. Look left on the chart, and identify the previous | | | | in determining where price is likely to hesitate that |
| low candle that has candle wicks higher to the | | | | watching trendlines. |
| immediate right and left of it which is lower than the | | | | However, they can be useful. If you find a key |
| current low candle. | | | | support or resistance level also coincides with a |
| 3. Now draw a line from the current lowest candle to | | | | Fibonacci retracement or extension level which is also |
| the previous lowest candle (drawing from right to | | | | at an intersection with a trendline, then you have built |
| left). | | | | a reasonably solid case for a trade. |
| 4. Now take the end of the newly drawn line which | | | | Use this Forex information on DeMark trendlines |
| stops at the current low candle and extend it | | | | wisely, with caution, and it can be another useful |
| forward some distance (drawing from the present | | | | addition to the Forex day trader's toolkit! |
| position to the right). | | | | |