CHAPTER 1

The Utility of Trendlines

Case: 1 Trendline at angle

You can draw a trendline at an angle as shown in the below figure. Trendline at angle identifies price and time (momentum) of trend during the session.

Trendline at angle
Trendline at angle

Case: 2 Extremely Optimistics

Upward trendline indicates that bull are controlling the market. Moreover, the slope or angle of upward trendline can indicate whether or not the market is extremely optimistics. As you can see the below figure indicates bulls are extremely optimistic in the market.

Extremely Optimistics
Extremely Optimistics

Case: 3 Extremely Pessimistic

Like Upward trendline, Downward trendline indicates that bears are controlling the market. Moreover, the slope or angle of downward trendline can indicate whether or not the market is extremely pessimistic. As you can see the below figure indicates bears are extremely pessimistic in the market.

Extremely Pessimistic
Extremely Pessimistic

Case: 4 Upward channel

The most simple way to draw a upward trendline is to connect two extremes, two high in this instance, to identify the resistance and two lows to identify the potential support.

After joining these highs and lows, you can see how beautifully price are fluctuating within these price channel.

During an uptrend these are highs are called higher highs or swing higher high and the lows are called higher lows or swing higher lows.

Price action upward channel example
Upward channel

Case: 5 Downward channel

The most simple way to draw a downward trendline is to connect two extremes, two high in this instance, to identify the resistance and two lows to identify the potential support.

After joining these highs and lows, you can see how beautifully price are fluctuating within these price channel.

During an downtrend these are highs are called lower highs or swing lower high and the lows are called lower lows or swing lower lows.

Price action downward channel example
Downward channel
day trading books

Top 10 Books For Day Traders

LIBRARY

Keypoints— Trendline Trading

  • A trendline represents the psychology of the bull and bear markets.
  • Upward trendline - Bull are controlling the market.
    Downward trendling - Bears are controlling the market.
  • A trendline reflects the market sentiment (optimistic or pessimistic).
  • Horizontal line is used to identify support and resistance, Vertical line is used to identify moments in time, Diagonal line is used to identify both price and time.
Next In Line