Diagonal Trend Lines as Support and Resistance

Diagonal Trend Lines give Direction

Diagonal trend lines are extremely important because they can tell you when to get in or out of a trade. Always remember to check your diagonal trend lines before you get in or out of a trade.  

In my last post about Support and Resistance, I discussed how a horizontal line can show you where the price (the candles) will go.  

As you probably remember, using the analogy of a house, resistance is like your ceiling and support is like the floor of your house. Jump too high and you will hit your head on the ceiling (resistance) and you will fall down and lay on the floor (support) glad that you did NOT continue to fall even further.

Our first picture will show where price (I use candles) came down today, stopped, and then reversed and went back up...What caused it to stop and not continue falling?

Buy Low, Sell High with Diagonal Trend Lines

This is a Daily chart using the GBPUSD currency pair.

You can see that price halted and reversed but why? If you draw a horizontal line it makes no sense. You see the horizontal price line (in black) is above the most recent "swing low" so why didn't it just drop to that point?  Seasoned traders will immediately say that it is a pullback before it drops more.  Well, I say maybe...maybe not.

Now let's draw a diagonal trend line and see if it gives us another trading clue on the same chart.

Same criteria and pair...Daily time frame on the GBPUSD

And there we get an idea (crowd mentality or psychology, whatever you want to call it) of a reluctance for traders going short to hold their positions. Because it is a diagonal support line it very well may just bounce off of that line and become a LONG play. If you had gone short you may just take your profits and wait to see if it will continue/resume its downward course or reverses its course and begins to go up. 

I prefer the profits over regrets.