Trading Tips Video: Using TREND LINES in Analyzing the Market

Trend Line Analysis is one important tool in technical analysis. It is normally used for trend identification as well as confirmation.

What is Trendline?
Trend line is a straight line which connects two or more price points. The line is then extended to the future to act as a Support or Resistance line.
In technical analysis, the general rule to establish a trend line is that it takes two price points to draw a trend line. The third point is typically used to confirm the validity.

There are 2 types of Trend Line:

1) UPTREND LINE
An uptrend line is a trend line that has a positive slope (trending upwards).
It is formed by connecting two or more low points. The second low must be higher than the first low.
An Uptrend line will act as a Support line. As long as prices stay above the uptrend line, the uptrend is considered solid and intact. A break below the uptrend line indicates that buying forces are weakening, and a change in trend could be imminent.

2) DOWNTREND LINE
A downtrend line is a trend line that has a negative slope (trending downwards).
It is formed by connecting two or more high points. The second high must be lower than the first high.
A Downtrend lines will act as Resistance line. As long as prices stay below the downtrend line, the downtrend is considered solid and intact. A break above the downtrend line indicates that selling forces are weakening, and a change in trend could be imminent.

How To Use Trend Line Analysis For Trading
Trend line analysis is used in several ways by traders.
One way is when the price returns to an existing trend line, it provides an opportunity to open / add new positions in the direction of the trend.
In Uptrend Line, buy when the price make a pullback to the support trend line.
In Downtrend Line, short when the price make a retracement to the resistance trend line.
This is because in technical analysis, it is believed that the trend line will hold and the trend will continue further. Basically, “Trend is your friend”.

A second way is that when prices break through the existing trend line, it may indicate that the trend might be going to fail. In this case, traders may consider exiting positions in the direction of the trend, or start to find opportunity to trade in the opposite direction of the existing trend.

Markets are made up of several different kinds of trends. There are short, intermediate and long-term trends.
However, basically the longer the trend line, the greater the importance.
It is the recognition of these trends that will largely determine the success or failure of your long-term or short-term investing / trading.

There is a video that show a good example about Trend Line Analysis.
Some more, it’s relevant to the current market situation. Therefore it may provide a trading opportunity for you as well.
Check it out HERE.

Related Topics:
* FREE Trading Educational Videos You Should Not Miss
* Trading Tips Video: Fibonacci Retracement, Support/Resistance, Stop Loss, Price Target
* Trading Tips Videos: How To Determine MARKET TREND & How To Use FIBONACCI To Measure Market Retracement
* Learning Candlestick Charts
* Learning Charts Patterns

Analysis Tool:
Get Free Trend Analysis for your favorite symbols