Educational Zone

Trendline definition

Trendline definition :

Before we start to describe the importance of trendline ,we need to describe how we draw a trendline first .

Trendline is simply a straight line connecting two points at least , either two peaks in a down trend and that is called ( down trendline ) or two bottoms in an uptrend , and that is called ( uptrend line ) . Trendline represent the market strength and crowd psychology in both up and down trend .

Importance of  trendline depending on four points

  1. Slope .
  2. Number of touches.
  3. Duration of trendline.
  4. The importance of selected points.


 

    The usage of trendline :

    The usage of trendline :

    1. Used as support and resistance.
    2. Used to identify breakout up or down.
    • Used as support and resistance :

    One of the most important use of trendline is to identify support and resistance, start connecting two highs is the first step to draw a downward trendline and identify resistance line, and when prices in a down trend or a down move bounced back upward as a counter trend move to the current down trend, it's expected be face or meet a strong resistance while approaching or touching the downward trendline.

    on the other hand,  start connecting two lows is the first step to draw an up trendline to identify support line, and when prices in a an uptrend or an up move bounced back downward as a counter trend move to the current up trend, it's expected be face or meet a strong support while approaching or touching the upward trendline.

    identify breakout up or down

    • Used to identify breakout up or down

    Weak signals :

    Buy signal :    when the prices breaks above the downward trendline.

    Sell signal:    when the prices breaks below the upward trendline .

     

     

    Strong Signals :

    Buy signal :    when the prices breaks above the downward trendline and minor previous peak.

    Sell signal:    when the prices breaks below the upward trendline and minor previous bottom .

    One of the most good signals when the prices break above or below the trendline and at the same time break minor peak or minor bottom and this is the ideal picture of breakout