Hello David,


I was taught by someone about FOREX Range-Bound trading which is trading within the channel.

My problem with this is that I don't know how to properly draw support and resistance trend lines.

Here are my questions:

1.) In a bullish trend of a candlestick chart should I draw the support line along the LOW wicks of the candlestick and should I draw the resistance line along the HIGH wicks of the candlestick?

2.) In Range Bound Trading should the support line and resistance line always be in parallel? What will happen if in an uptrend the resistance line is in a different angle than that of the support line?

3.) In Range Bound Trading is it recommended to use a combination of trendline analysis and MACD?

4.) What is DeMark Trendline? How do I draw it? Is it recommended in Range Bound Trading?


Thank you very much.


Regards,
Jeff

Hi Jeff,

Welcome to the community.

I have answered your questions below in the order received:

Yes this is how most traders would draw the channel. There are some good resources on drawing trend channels below:

Price Channel

8/25/07 Webinar with Oscar - Trading Channels, Interest Rates, and Holiday Trading


If the market is in a range then yes in general I think most traders would agree that the support and resistance lines should be parallel. If the market is in an uptrend then it is by definition not in range so the second part of the question really speaks more to price channels which you will learn about at the links above.


When the market is in a range then it is not in an uptrend or a downtrend but trading sideways back and forth. With this in mind I think most traders would agree that the use of trendlines is not a good idea when trading ranges.

There are however many traders that I have spoken with you use the MACD to trade ranges.

There is a good article which explains what DeMark Trendlines are and how to draw them and when to use them here:

How to Draw DeMark Trendlines

Hope that helps. If there are any other comments on this one feel free to post them below.

Best Regards,
Dave