FINDING AND DRAWING INNER, OUTER,AND LONG-TERM UPTREND LINES
You find and draw inner uptrend lines by finding the last two levels of support
and drawing the line from left to right. You find and draw the outer
uptrend line by starting at the far left of the chart and moving to the right,
connecting the majority of your lower levels of support with a straight line.
In other words, you start at the left of the chart and find your lowest wick
98 THE 10 ESSENTIALS OF FOREX TRADING
low. From there you draw a straight line at about a 45-degree angle up,
finding the next or higher level of support. You then connect the two wick
lows, or levels of support, with the uptrend line, without penetrating any
candles on the chart. As long as the chart is making higher highs and higher
lows, you stay below the lows of support (see Figure 6-7).
Find and draw the long-term trend line by either compressing the
chart or going to a larger time frame, connecting your levels of support
starting from the far left of the chart moving forward. Because inner and
outer trend lines form on all time frames, you need to look at a daily chart,
where if you happen to see an inner and an outer uptrend line, the inner
uptrend line will represent the most recent up movement for that time
frame. The outer uptrend line represents the up movement over the past
couple of months. If you look at an hourly chart, the inner uptrend line represents
the up price movement over the past few hours, whereas the outer
uptrend line represents the up price movement over the past couple of days.
It is always best to compress your charts in the time period you are looking
at to find any additional outer trend lines, or the long-term trend line.