Trendline

Trendline

It is a line between two critically highs or lows, helping to determine a prevailing trend. It is an easy yet efficient tool in technical analysis.

To draw a trend line, locate two tops or two bottoms, and connect them. To confirm a trend, you can add a third point. 

Depending on their direction, trendlines can be:

  • Uptrend 

    When the prices rise, the trendline follows in an ascending manner. 

  • Downtrend 

    When the prices fall, the trendline follows in a descending manner. 

Tips on trendlines

  • They are diagonal and never horizontal.
  • You can draw the most reliable trendlines in larger timeframes (daily, weekly, or monthly).
  • Do not try to fit a trendline to your chart.
  • If a price breaks a trendline, it does not necessarily mean that the trend is changing its direction. It can also be a case of a false breakout

Trendline analysis helps to follow only the useful information on the chart and cut out the slight deviations. It helps to concentrate and learn to see a bigger picture before making any market decision. 

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2020-07-27 • Updated

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