Trend lines connect a series of highs or lows to define and confirm a trend. The trend may be an uptrend or a downtrend, but it will generally be identified by trend lines. Trend lines are straight lines which are drawn along at least two relative highs or relative lows. Trend lines may be horizontal trend lines or slanted, as is the case with rising trend lines (uptrend lines) or descending trend lines (downtrend lines).
Trend lines are often good places to initiate trading positions with a low-risk entry, because a penetration of the trend line is a break of the trend, which provides an exit signal. The more times that price touches the trend line, the more significant and valid that trend line becomes. When trend lines first begin to form, they may require redrawing to be sure to connect significant lows and highs, but as a trend line matures, it will rarely need to be adjusted. The steeper a trend line’s angle, the less reliable it becomes.
Trend lines are the most-used tool in our approach to trading, so nearly every chart we share with members of our stock pick service has a trend line drawn. These are useful for entries, exits, and simply gauging the pace of a trend. Come trade with us!
There are two kinds of trends:
Click on uptrend and downtrend pictures above to learn more about trend lines.