What Is Forex Line Trading?

Maybe you’ve heard of “trend line trading” but you’re not sure how it works. Well, traders often use what we call “trend lines” to track whether a price is moving up or down. This technique works in the Forex marketplace, too.  

But what actually is Forex line trading, and is it worth trying? Below, we explain everything you need to know.  

What Is Forex?

First, let’s be clear on what Forex is.  

Forex, or FX, means buying and selling currencies. Basically, you buy one currency, and you want to profit from selling another.  

The Forex market is a worldwide marketplace – it never sleeps. It’s constantly changing, too, because there are so many things that can affect how much a currency is worth. Currency values go up and down based on things such as:

• Financial news 
• Global politics  
• Serious international events 
• Major company news 
• Other breaking news stories 

If the Forex market is so volatile, then you need ways to track price changes. And quickly. Which is where trading Forex using line charts can help.  

What Is Forex Line Trading?

Trend line trading means using a line chart to track an asset’s selling price over certain periods. In other words, you’re tracking the closing price. By drawing a simple line, you can quickly track whether a price is trending up, down, or staying the same.  

Why would you use a trend line like this? Well, it can help you decide when to get in or get out. And you won’t be distracted by too much data, which is great for beginners.  

Trend lines are clean and simple without “information overload”. You can cut through all the noise and see, quite simply, an asset’s long-term price movements.  

Forex line trading just means using line patterns to track the price of currencies. You might use this to decide which currency pairs to buy, when to sell, and when to hold back.  

Pros of Forex Line Trading

If you’re into Forex day trading, trend lines do have their upsides.  

• They are super easy to understand. This makes them beginner-friendly. Even the newest trader can plot a trend line once they know how.  
• Trend lines are simple. They give you an overview, or broad picture, of what’s happening with an asset’s price fluctuations. This helps day traders who need to move quickly. 
• Since trend lines are so simple, you can easily use them with other chart patterns or techniques. And the more data you have, the better.  

Cons of Using Trend Line Strategies in Forex Trading

Okay, so that’s why we like Forex trend lines. But what about the downsides? Well, there are a few.  

• A trend line is just that. A line. It doesn’t have much detail. So, it might help beginners, but even then, it might not be enough.  
• Trend lines only tell half the story. For example, just because price points moved in a certain direction before doesn’t mean they will again. You need more data to make good trading decisions.
• With that in mind, trend lines can lead to mistakes. If you only look at one type of pattern, you’re missing out on key data. You’re losing out on information that could help you buy and sell at the right time.   

Is a Forex Trend Line Trading Strategy Right for You?

Here’s the lowdown. Forex line trading can be helpful. It’s easy to understand and it gives you a good starting point.  

But that’s just what it is – a starting point. A springboard.  

And while it’s useful, you’ll get more from line trading if you use it alongside other strategies.  

With that in mind, there are other trading strategies you might go for, such as: 

• Fundamental Analysis: This means figuring out what an asset is actually worth. You then look at what outside factors – such as global politics and news – are affecting how much people will pay for it.    
• Technical Analysis: Line trading is a key part of technical analysis, but it’s not the only part. You figure out what people might pay for an asset based on what investors have paid before.   
• ICT Style Trading: All you focus on here is the “price action”. You’re not relying on chart patterns or lines. You just focus on what it looks like the market is doing. 

Ultimately, there’s no perfect trading strategy. It all comes down to what’s right for you and how you like to trade. And you can always switch it up and give other strategies a try down the line.  

Remember, as traders, we’re all about learning. And growing. All the time. Try different strategies on for size and see what works for you. 

How to Use Forex Trend Line Trading

Want to give trend line trading a go? While we can’t give you trading advice, we can give you some tips for getting started.  

• Before you make your first trade, set yourself some goals. For example, think about the currency pairs you want to buy and how much time you’re prepared to spend on trading. Have a strategy.  
• Learn how to draw trend lines. Seriously. It might sound obvious, but you’d be surprised how many traders can’t draw trendlines. Even though they plan on relying on them!   
• Think about how much risk you want to take on. No trade is risk-free, but some are riskier than others. Know what you’re comfortable with and don’t budge on it.  
• Don’t let emotions cloud your judgment. Don’t let anger, stress, or fear tell you what to do. Stick to your trading plan and learn from any mistakes you do happen to make.  

Join the Maven Trading Community

At Maven Trading, we’re always looking for traders like you. Traders who care about reaching their potential. Traders who care about learning and building their skills. That’s why we’re keen to welcome you to the Maven Trading community.  

Want in? Choose a simulated funded account first. Then, all you need to do is pass our challenges. Show us what you’ve got, and we’ll give you simulated funds to trade with.  

The best part is that you can keep your profits! We only take a small percentage to cover our fees – we think that’s pretty fair. So, join us today and help us build a community of great traders. Choose your challenge and start your journey!