Trends

What is a trend?

A trend is an overall direction of a market or an asset's price. In technical analysis, trends are identified by trendlines. Uptrends are identified by trendlines where the price makes higher highs and higher lows. In a downtrend the trendline shows lower lows and lower highs.

What is a trendline?

They are easily recognisable lines that traders draw on charts to connect a series of prices together. he resulting line is then used to give the trader a good idea of the direction in which an investment's value might move.

A trendline is a line drawn over pivot highs or under pivot lows to show the prevailing direction of price. Trendlines are a visual representation of support and resistance in any time frame. They show direction and speed of price, and also describe patterns during periods of price contraction.

How to draw a trendline?

A trendline should be drawn from right to left since recent price activity is more important than past historical movement.

Drawing an Uptrend

1. Select the most recent price bar whose low is lower than the price lows on both sides of it. This will be the point 1 of the trendline.

2. Look to the left till you find the next lower bar that is lower than point 1 and lower than the point lows on both sides of it. This will be point 2

3. Then draw an upsloping trendline connecting points 2 and 1 and extend the line to the right

4. The more lows on either side that are higher than the lows on point 1 and 2, the stronger and more reliable the uptrend line

Uptrend line is always drawn by connecting the lower points of a stock movement