The trend lines is a line drawn over the pivot highs or under pivot lows to show the forthcoming price trend. The concept of trend lines was started to give a visual representation of support and resistance in any time-frame as a direction and speed indicator of price. Especially when the price range starts to contraction.
BREAKDOWN TRENDLINES
Analysts are classified into two: Fundamental traders and technical traders. Trendline breakout is one of the essential tools for technical traders. Once the price range starts to contraction it has to break the previous high or low and help traders to make a trade decision whether to buy or sell.
CREATING TREND LINES
To create a trendline, an analyst must have at least two points on a price chart; the time frame must differ from individuals.
If company X is trading at $35 and moves to $40 in two days and $45 in three days, the analyst has three points to plot on a chart, starting at $35, then moving to $40, and then moving to $45. If the analyst draws a line between all three price points, they have an upward trend. The trendline drawn has a positive slope and is, therefore, telling the analyst to buy in the direction of the trend. If company A's price goes from $35 to $25, however, the trend line has a negative slope and the analyst should sell in the direction of the trend.
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BREAKDOWN TRENDLINES
Analysts are classified into two: Fundamental traders and technical traders. Trendline breakout is one of the essential tools for technical traders. Once the price range starts to contraction it has to break the previous high or low and help traders to make a trade decision whether to buy or sell.
CREATING TREND LINES
To create a trendline, an analyst must have at least two points on a price chart; the time frame must differ from individuals.
If company X is trading at $35 and moves to $40 in two days and $45 in three days, the analyst has three points to plot on a chart, starting at $35, then moving to $40, and then moving to $45. If the analyst draws a line between all three price points, they have an upward trend. The trendline drawn has a positive slope and is, therefore, telling the analyst to buy in the direction of the trend. If company A's price goes from $35 to $25, however, the trend line has a negative slope and the analyst should sell in the direction of the trend.
Hit like,comment and follow for more profitable trading ideas.
