Trend Line

A trend line is a chart pattern that connects a series of highs or lows, forming a straight line. It is created by joining two or more price points, with the goal of identifying the historical trend of price movements and highlighting support and resistance levels.

Trend lines are used to confirm and identify trends and predict support and resistance levels.

They can be drawn from highs (indicating resistance) or lows (indicating support).

To construct a trend line, one needs to connect the high or low prices on a price chart, and the line is extended into the future to show potential areas of support or resistance. The more points used to form the trend line, the stronger it is considered.

There are two main types of trend lines:

1. Ascending trend line (uptrend Line): formed by connecting higher lows, indicating that the price is trending upward. It acts as a support level, with more buyers than sellers. When the price stays above this line, it signals a bullish trend;

2. Descending trend line (downtrend line): formed by connecting lower highs, indicating that the price is trending downward. It acts as a resistance level, with more sellers than buyers. When the price stays below this line, it signals a bearish trend.

Trend lines are often tested multiple times by price before breaking. When a trend line is broken, especially with high volume, it can lead to a significant price move and signal a potential trend reversal.

While traders have varying approaches to constructing trend lines, it is important to remember that all trend lines eventually break.