Introduction to TrendLines

Now that we understand the concept of the trend let’s learn how to draw trendlines on our price chart.
This is easy.

First things first.
To draw a straight line, two points are needed.
Similarly, to draw an up trendline 2 higher bottoms are needed.
Say, that after a prolonged downtrend a reversal is being formed.
To draw an up trendline simply draw a straight line connecting the 2 bottoms.
This is called a tentative trendline.

Conversely, to draw a downtrend line, we connect two tops.
Now, when the trendline is verified with a third point, then it is known as a valid trendline.
Valid trendlines are more reliable and traders feel more confident that prices will find support at an up trendline or resistance at a down trendline.
In a nutshell, the more times a trendline has been tested the more reliable it is.

Additionally, the time factor is also important.
The more recent the trendline has been tested the stronger it is.
For example, a trendline that has been tested 10 times in the last month compared to 10 times in the last decade is more reliable and stronger.
In addition to that, a trendline that has been intact for the last 6 months is considered stronger compared to a trendline that has not been violated the last 3 days.
When the price reaches the trendline it will subsequently bounce off, and when/if the price manages to breach the trendline, then the reversal will be worthwhile.
What I am saying here, is that theory has it that the breaking of a strong trendline implies a strong reversal.

Thanks for watching and see you guys soon!