What is a horizontal line? Learn the basics of line analysis! - Horizontal Line Part 1 - 【Line Analysis Basics Lecture #1】

Hello! This is SAKU!

From the previous posts we've been delivering about MTF (multi-time frame) analysis, but from now on we will start discussing line analysis!

Let’s have beginners in line analysis firmly learn from the basics as well!

In line analysis, many kinds of lines are used, but personally I think the first thing to master is horizontal lines.

So, starting this time and continuing for a few sessions, horizontal lines will be discussed, and for the very first one, about horizontal lines, what horizontal lines are and how to draw them will be introduced!

What is a horizontal line

　A horizontal line, as the name suggests, is a line drawn horizontally on the chart! (Boom!)

As for its role, it helps determine the direction of the trend, identify traces of buying and selling battles, find points of price reversals, and use those traces to form expectations for the future, among other roles.

Where to draw horizontal lines?

You can draw horizontal lines anywhere and any number, but commonly considered horizontal lines include the following:

・Lines drawn at prominent highs and lows
・Lines drawn at support lows and resistance highs
・Lines drawn at round numbers
・Lines drawn at the top and bottom of a range
・Lines drawn at points where resistance has turned into support (and vice versa)
...and so on
Let’s go through them one by one!

・Lines drawn at prominent highs and lows

Prominent highs and lows are the highs and lows that visually stand out when you glance at the chart!

These areas help indicate how far prices might move and how close they currently are to those highs and lows.

In these areas, it’s good to place horizontal lines for reference.

・Lines drawn at support lows and resistance highs

Support lows and resistance highs have been discussed during the trend section, so you should have mastered them by now!

If you’re still not clear, the article defining the trend—please read it again and be sure you understand!

Pushes of support lows and resistance highs are common focal points that many traders watch.

Also, past support lows and resistance highs can become relevant again, so drawing horizontal lines there is a good idea.

When drawing lines at support lows and resistance highs,don’t just draw them; be mindful that they may be turning points signaling the end or continuation of a trend.

・Lines drawn at round numbers

Round numbers are neat figures like 150, 155, 160, and so on.
Lines drawn at these tidy numbers are often watched closely.

The reason is that most market orders tend to be placed at round numbers, unlike market orders which tend to be at arbitrary levels. Limit orders are often placed at round numbers as well.

As a side note, a technique using this property is to deliberately avoid round numbers when placing stop orders to reduce being hit by price swings.

・Lines drawn at the top and bottom of a range

In ranges (rectangle-shaped), when the price approaches the upper or lower bound, these levels are often monitored as turning points for the range.

Also, ranges that have been watched in the past tend to continue to trade within that width in the future.

・Lines drawn at points where resistance becomes support (and vice versa)

About this, since we need to explain resistance and support as well, I’ll leave it for the next time!

Let’s actually draw a horizontal line!

Let’s actually draw horizontal lines on a chart to see what they look like and how they’re perceived in practice.

Here I’ve drawn lines at prominent highs/lows and at round numbers!

There are quite a few lines drawn, huh.

In the next image, I’ve circled the places where the drawn horizontal lines are being observed!

Can you see it?

The phantom of the bull that appears in the upper left of the screen is not!

Instead, you can see price moves reacting to the horizontals drawn at highs, lows, and round numbers!

In this way, drawing horizontal lines visualizes price levels that are being watched or likely to be watched, and the traces of buying and selling.

Anyway, for now, that’s all about the main places where you can draw horizontal lines!

These lines are among the foundations of line analysis, so go ahead and try drawing horizontal lines on your own chart and think about it in various ways!

What’s important in line analysis is not just drawing lines, but understanding the intent behind them, what you’re watching in terms of perception, and what reactions are occurring as a result!

If you found this article helpful, please like or give a ♥—it motivates me!

For those who want to master more advanced and practical line analysis trading from the basics, click here ↓

→The Essence of MTF Multi-Time-Frame Analysis