Trendline technique

The trendline technique is a school of technical analysis that helps determine the current direction of price movement. This plays an important role in trading, increasing the success rate and minimizing the risk.

Trend lines are important indicators that identify current trends and predict future trends. A trend line is a straight line connecting peaks or troughs together. There are two main types of trendlines: uptrend lines and downtrend lines.

– Uptrend line: A line with a higher top than the previous one, and a higher bottom than the previous one.

– Downtrend line: A line with a lower high than the previous one, and a lower bottom than the previous one.

Trendline technique

1. How to identify a trend line:

To determine the trend line, we compare the positions of consecutive peaks and troughs. Specifically:

Step 1: Mark the tops and bottoms. on the chart. Consists of at least two peaks and two troughs.

Step 2: Connect consecutive peaks and connect consecutive troughs.

Step 3: The trend is complete when the line connecting consecutive peaks and troughs is in the same direction.

2. Using trendlines:

Investment analysts often use trendline techniques to identify market trends, resistance levels, support levels, and price zones for effective trading.

Resistance and support lines:

The resistance line is the highest price line that is parallel to the trend line and crosses the most peaks.

The support line is the lowest price line that is parallel to the trend line and goes through the most bottoms.

Support and resistance levels are identified at the peaks and troughs in the trend. When the trend line is broken, the support and resistance levels will switch roles.

Price range:

The price zone is the price range created by two resistance and support lines.

The price zone is said to change when the price breaks out of the previous price zone. That is, the price breaks the upward resistance line or breaks the downward support line.

The trend line technique assumes that the market will move along the trend line, and the price fluctuates within the specified price area. That is, when the price rises to the resistance line, the price will tend to fall and when the price falls to the support line, the price will tend to rise.

Therefore, experts say to trade with the market trend and sell when the price reaches the resistance line, and buy when the price reaches the support line. Investors need to pay attention when the price reaches the support and resistance levels in the price zone.

Price range

3. Some notes:

– Trend lines are determined from multiple peaks, multiple bottoms will be more reliable.

– The price touches the resistance line, the more the support line, the stronger it is. If the price breaks through that line, it will likely create a very strong trend.

– The steeper the trend line, the more likely it is to be broken.

– The normal price zone only creates a “psychological resistance zone”. Therefore, investors need to combine with technical resistance areas to increase efficiency and accuracy when trading.

– Trend reversal is only determined when the trend is complete. That is to create a new high, a new low against the old trend. Sometimes the price breaks the resistance or support line but has not made a new high, a new low is contrary to the trend, and it is not possible to determine whether the trend has reversed.

Hopefully, through the article, you have understood the basics of the trendline technique and used the trendline technique effectively.

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