Drawing Trend Lines

Drawing Trend lines

Lines drawn at an angle above or below the price are known as trend lines.

They hint us the immediate trend and also trace when a trend has changed.

They are also helpful as support and resistance by providing space to open and close positions.

Drawing trend lines

Below is an illustration of a trend line in a downtrend and an uptrend.

trend

Number 1: Displays three swing highs on the downtrend

Number 2: Displays three swing lows on the uptrend

Trend line in a downtrend: Drawn above the price.

Practice session:

Find the trend lines. Show exercise

Trend line in an Uptrend: Drawn below the price

The trend line is comprised of the highs on a downtrend and the lows on an uptrend.

Practice session:

Find the trend lines. Show exercise

A minimum of two swing highs or swing lows are required to draw a trend line in either direction.

In fact, the validity of a trend line relies on at least three highs or lows used.

The more number of times the price touches a trend line, the more it becomes valid as there are more traders using them as support or resistance.

Using the wicks or bodies of the candles

When drawing a trend line, most traders prefer wicks and some prefer the bodies of the candlestick which is acceptable.

The chart below is an illustration which depicts a trend line drawn using the bodies of the candles.

trend

 As the trend lines are subjective in nature. We need to choose a methodology suitable for us but not deviate from it.

Nut Shell

An overview of the lesson discussed so far….

Lines drawn at an angle above or below the price are known as trend lines.

They hint us the immediate trend and also trace when a trend has changed.

They are also helpful as support and resistance by providing space to open and close positions.

Trend lines are drawn below the price in an uptrend.

Trend lines are drawn above the price in a downtrend.

Two lows must be connected by a straight line in an uptrend.

Two highs must be connected by a straight line in a downtrend.

Trend line should be connected by at least three highs or lows to make it valid.

More times the price touches the trend line, the more it is considered valid.

A trend line break, where the price breaks through the trend line is another technique of trading.