Binomo platform offers numerous technical analysis instruments for its users. It is good to know what they are so you can choose those that work well for you. Today I am going to present a very simple, yet efficient tool known as a horizontal line.
Using a horizontal line tool on the Binomo platform
A horizontal line from a geometrical point of view is the line parallel to the x-axis. It further means that the y value is the same for all values on the line.
A horizontal line in technical analysis is the line that joins similar swing highs or swing lows in the price.
In order to use a horizontal line drawing tool on the Binomo platform, you must click on the pen icon (drawing tools) and find ‘Horizontal’ on the list. Select it and you can begin drawing.
You can make the line more readable for you on the Binomo platform, by changing its colour and style.
You have an option to draw more than one line. You will stop drawing after clicking the suitable button.
Some of the important price levels are resistance and support. To mark them on the chart, you can use a horizontal line. When you draw it in the way it connects matching swing lows, you will get the support level. When you join similar swing highs, you will draw the line that will serve as resistance.
These levels are so important because price often respects them and fluctuates between them. The market is then ranging. Naturally, the boundaries will not hold forever, and so the traders use additional tools to be able to predict the moment of the breakout and open positions accordingly.
Consider the exemplary AUDUSD chart below. Similar swing lows are connected by a horizontal line and so we received the support level. At some point, the price breaks it and creates a new low. You have the right to assume the price will decrease. But when the price moves up again and rises above the support level, you should accept the downtrend has failed, and the price will go even higher.
Horizontal lines are also used in fundamental analysis when reports about the remunerations and other statements are compared to find differences in values and prices during a certain period of time. When you hear that incomes have increased in the last quarter by 20%, you can be sure horizontal analysis has been applied. Some base period was established and then the grade of change after some time was calculated. A percentage value is obtained by dividing the change between the base and the comparison years in dollars by position value in the base year and multiplying the result by 100.
Another use of horizontal lines is when talking about supply and demand. The price is shown on the vertical axis and on the horizontal axis the quantity of demand. A service or product is totally elastic when the supply and demand curves create a horizontal line. If the price exceeds the market price, the demand quantity will fall which means that people do not agree to pay so much money for this product.
Many tools are available on the Binomo platform. You should not forget about the simplest ones such as a horizontal line. It is a line that connects similar swing lows or swing highs in the price. It helps to determine support and resistance levels which are very important levels in the technical analysis.
There is also a trendline drawing tool that also joins the lows and highs of the price. The difference is that a horizontal line is specifically horizontal and the trendline is typically inclined in the direction of the trend.
Go to the Binomo demo account now and start drawing with the horizontal line tool. See where it gets you in your trading journey.
Enjoy and good luck!