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Trend Lines

If you believe, I can tell, technical analysis can be done using no indicator, oscillator or overlay. Yes, I mean just trend lines. This exceptionally works well for positional traders (short, medium and long terms). Unlike other indicators, these are not pre-arranged option in any charting software but a tool is dedicated only for drawing trend lines. Support – Resistance lines too come under this category which will be discussed in our next chapters.

A trend line is a straight line touching 2 or more points to define a trend likely to follow in future.

trend lines

Points to remember while drawing a trend line

The more points a trend line connects, the more respect market shows towards the trend.

Points connecting the trend line should have good enough distance. Points of less distance may not be effective as they are not the real trend exposing points.

Though trend lines can be used in many ways, basically trend line can be classified in 2 ways. It serves as a support line when markets are rising and a resistance line when markets are bearish. Former line named as Uptrend line and later as Downtrend line.

Uptrend Line

trend lines

An uptrend line is a straight line connecting the lows in a bullish market. This is also known as positive slope. It acts as a support line during a bull market. Its obvious to see the lows connecting the trend line exceeds the previous low. If the lows connecting the line are more, the trend is said to be a strong one. As long as the line keeps going with the prices above that, bulls may drive the trend. The moment prices misbehave with the slope, trend may take a reversal.

Downtrend Line

trend lines

This is a straight line as well heading downside connecting the highs especially in a bear phase. This can also be called as negative slope. This line kisses the highs of every low (lower highs) and serves as a resistance line. One can go with a bearish view till the prices are below the trend line (Resistance line). Once if the prices break the above said line, it may result in a trend reversal.

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