TREND LINES
Trend lines are probably the most common form of technical analysis in trading. They are probably one of the most underutilized ones as well. If drawn correctly, they can be as accurate as any other method.
In their most basic form, an uptrend line is drawn along the bottom of easily identifiable support areas (valleys). This is known as an ascending trend line. In a downtrend, the trend line is drawn along the top of easily identifiable resistance areas (peaks). This is known as a descending trend line. To draw trend lines properly, all you have to do is locate two major tops or bottoms and connect them.
There are three types of trends:
• Uptrend (higher lows)
• Downtrend (lower highs)
• Sideways trend (ranging)
It takes at least two tops or bottoms to draw a valid trend line but it takes THREE to confirm a trend line. The STEEPER the trend line you draw, the less reliable it is going to be and the more likely it will break. Like horizontal support and resistance levels, trend lines become stronger the more times they are tested. And most importantly, DO NOT EVER draw trend lines by forcing them to fit the market. If they do not fit right, then that trend line isn’t a valid one!
Related Queries:
- Trendlines
- What is trendlines?
- Uptrend
- Downtrend
- Sideways
- Higher highs
- Lower highs
- Higher lows
- Lower lows
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