Horizontal analysis looks at the trend of financial statements over multiple periods, using a specified base period, and typically shows the changes from the base period in dollars and percentages. The percentage change is calculated by first dividing the dollar change between the comparison year and the base year by the item value in the base year, then multiplying the quotient by Horizontal analysis can be used on any item in a company's financials, from revenues to earnings per share EPS , and is useful when comparing the performance of various companies.
Supply and demand curves are drawn with price on the vertical axis of the graph and quantity demanded on the horizontal axis. When looking at supply and demand curves, a perfectly horizontal line indicates that an item has perfect elasticity , or that its demand is immediately responsive to changes in price. When the price of a perfectly elastic good or service increases above the market price, the quantity demanded falls to zero.
With perfect elasticity, consumers simply are not willing to spend more than a specific price for a good or service. Drawing a horizontal line is one of the simplest forms of technical analysis, but it also provides important information. An uptrend is when a price makes higher swing highs and higher swing lows. Therefore, a horizontal line can highlight when price is making a new high, in this case, thus showing signs of an uptrend.
On the SPY chart above, the price is moving above the horizontal line indicating an uptrend. If the price falls back below the horizontal line, it could warn that uptrend has failed and lower prices may be forthcoming. In this sense, the horizontal line acts like a line in the sand, where moving above the line is bullish. Both these terms could refer to the same thing: drawn lines on a chart. While a horizontal line is specifically horizontal, a trendline is typically angled and drawn along rising swing lows during a price uptrend or drawn along dropping swing highs during a downtrend.
A horizontal line is not an actual barrier for price. It is a technical tool which may help traders determine whether they should be more bearish or bullish. Where a horizontal line is drawn is subjective. Not all traders may place the horizontal line at the same price.
At highly important prices, where a horizontal line may be drawn, it is possible the price will whipsaw around it. This could cause confusion or some potential losing trades until the price makes a more decisive move above or below the line. Technical Analysis Basic Education. Trading Strategies. Day Trading. Your Money. Personal Finance. Your Practice. Popular Courses. Trading Technical Analysis. What Is a Horizontal Line? Key Takeaways A horizontal line is commonly used in technical analysis to mark areas of support or resistance.
A horizontal line runs parallel to the x-axis. In technical analysis, the horizontal line is typically drawn along a swing high, or a series of them, where each high in the series stopped at a similar level. The same concept applies to swing lows. Compare Accounts.
The vertical line has no particular use in trending unless used on the charts for remembering a particular time or part of price action. For the remainder of the article, we will, therefore, focus on the trendline and horizontal line. We also have training on Trend Line Drawing with Fractals. The validity is another difference between a trend line and a horizontal line.
A horizontal line could be placed at any support or resistance level that a Forex trader assesses as important. A trend line, however, must have multiple touches to be considered valid. Horizontal lines also have more importance once price action respects that level multiple times but it is not a prerequisite for validity.
A horizontal line that has one price point is a support or resistance. A horizontal line that has multiple points is potentially stronger support or resistance and could be the top or bottom of a range. Also, read about the Stop Loss Order Forex. In theory, both horizontal lines and trend lines can be used for trading breakouts.
Trading breakouts have big advantages — primarily because traders avoid lots of moments where price action is indecisive. Price action does tend to consolidate the majority of the time and trading breakouts give the advantage of entering when the market has a higher chance of moving in your favor.
Avoiding long-drawn-out sideways chop certainly helps that psychological battle. But it also allows for optimal allocation of trading capital. There is a difference when trading trend lines or horizontal lines.
The angle is the primary focal point because there is also a difference between trading shallow trend lines, regular trend lines, and steep trend lines. Price usually corrects the angle of the trend before it continues with the trend. In general, these trend lines are great as a trailing stop and are an excellent method of making a profit upon a break.
Some steeper trend line breaks do see a reversal. And trading those to the opposite side is profitable. This is primarily happening when a 4-hour chart is showing a trend and the smaller time frames are moving in a steep correction. A break of that steeper counter trend line has a higher chance of succeeding. The market is showing exhaustion to one side by price is moving correctively in these cases as the angle suggests.
A break of the trend line indicates the end of that corrective movement. These trend lines, however, still have plenty of space towards the next bottom or top support or resistance and that is the primary reason why the breakout is often less volatile than trend lines with a shallow angle or horizontal trend lines. The "stable" breakout will lead a good run in one direction before the currency bottoms or tops out on the lower time frames.
Therefore using a tighter stop loss has a higher chance of succeeding here than in other examples. At that moment there is a good chance of a hook back or pull back to the price level of the broken trend line. But only after a good size price moment has been made. Both the breakout strike and pullback boomerang are trade setups that the Winners Edge Trading room employs. The market can hardly move away from the top or bottom. The correction is very timid.
A break of the trend line also indicates the end of that corrective movement but there is one crucial difference: tops and bottoms support and resistance are close by and this could make the breakout short-lived before price action respects those levels.
In our trading room, we have a simple solution to making sure that we have an appropriate reward to risk when tackling these trades. This helps take away the subjectivity from the decisions. Remember, always keep your approach to trading as simple as can be. Due to this lack of space to the next support or resistance, price action often moves choppier than usual. Forex traders are not willing to make a trade right in front of these levels so many up and downs are usually accompanied by this environment.
Our trading room also has guidelines on how the breakout should proceed. That could cause an unexpected and sudden opposite turnaround. Often enough the break of the horizontal level is accompanied by lots of volatility and sudden moves up and down. The breakout will see some follow-through but often enough this potential is limited as price action wants to hook back to the broken horizontal level. Very frequently the currency actually makes a retracement after this breakout.
This retracement could even turn into a full-fledged reversal.
That's what we are looking for and that's the reason we trade with the color of the H1 candle rather than the M1 candle M1 chart above. Just use a little risk management and money management. Practice with 1 minilot or 0. One of the things you want in trading is an " edge ". You are NOT going to win every trade. So you want something that gives you a edge. Casinos have edge in the range of 0. That's all they need. My statistics show this edge is much higher. Choppy days? I love choppy days.
So long as the average hourly range is over 25, that's all the edge I need. You can look for situations where this doesn't work The best trade is waiting for the reversal. When to get out? If you have profit, get out when you want to. You can always exit part of your position. Move stop up to breakeven and let the rest ride! Once again, the color of the previous candle makes no difference. It is that simple. Don't make this simple trading method complicated.
Once again, waiting for a reversal is the "safe" trade. You must trade in the moment. The past is over! All that matters is what price is doing now!! What would you do if all you had on your chart was the current candle? If the current candle is green would you short? When I already a security then I would draw a horizontal level and a Trend line.
And look at the price action bars to pick a price point of where I should sell the security. For example if I see a stock that I own goes down then I would sell it if it exceed my minimum lost ratio. And if I see a stock that I own is about too hit the resistance level then I would keep it. If it bounces back from the resistance level then I would sell the stock. However if I was in a CFD trading or option trading then I would sell before it hits the resistance level. After reading this section you have learned that you should use the strategy of three elements.
And that strategy can be very profitable. You have also learned what Horizontal levels are and how to use them for your trading strategies. And you know also now that horizontal levels are used in many strategies and that great Investors like Warren Buffet, George Soros, Jesse Livermore and so on are making use the horizontal levels. With this valuable information you now have increased the chance of making profits with your trades. Price action bars. Market cycles. Moving averages. Trend lines.
Horizontal lines. First Name. Last Name. Horizontal Levels. What are Horizontal Levels? Difference between a Horizontal Levels and a Trend line. An example of a Trend Line. An example of a Horizontal line. How to make a profitable trade with Horizontal Levels. Now what if you already own a security stocks or currencies pairs and so on what would you do?
What have you learned? Trend Lines. Technical analysis. Trend lines Horizontal lines Patterns. Fibonacci Indicators. Learned enough? Sign up for free and start trading now.
A horizontal line that has multiple points is potentially stronger support or resistance and could be the top or bottom of a range. Also, read about the Stop Loss Order Forex. jellt.xyz › horizontal-vs-trend-lines. A horizontal line proceeds from left to right on a chart, or parallel to the x-axis. It commonly marks support or resistance in technical analysis.