



Trend lines are lines drawn at an angle above or below the price. They are used to give indication as to the immediate trend and indicate when a trend has changed. They can also be used as support and resistance and provide opportunities to open and close positions.



How To Draw Trend Lines Correctly



Trend lines are a perfect way to frame the trend in the market and often times to be saving as support and resistance.



Keep in mind that it is not the actual trend line that stops the price but that can identify areas on the chart where the trader may be interested in taking a stand.



Often you will find that when you draw a trend line, and price comes down to it, there are also other price structures in the region that can add convergence to your trading setup.



When looking for trend lines it is very easy to be too subjective, so it is crucial that you decide your method of drawing them and them and then to be consistent.



You will never know whether you take full advantage of the ability of your trading system, without being consistent.



What Does A Trend Line Correctly Drawn Give You



A trend line, it can quickly provide you with 3 things that can help you in your business. Trend direction potential market shift points visibility without trading indicators.



(1) Trend Direction



(2) Market Swing Points



(3) Without Technical Indicators



Trend Direction



Although some traders (most) use moving averages to assess trend direction, you will be shown the overall direction of the market by a correctly drawn trend line. When a trend line breaks, it will give you a "head up" of a potential trend directional change.



Market Swing Points



Price is moving in waves with peaks and troughs. Trend lines can highlight areas on your chart where the next price change can occur, especially in the dominant trend direction.



Without Technical Indicators



Too many traders use too many trading indicators on their trading charts. They have duplicate information (some traders use 2 or more momentum indicators, for example) and all this leads to confusion and faulty signals. Trend lines keep it simple and don't hide the most important part of any chart price.



Drawing Trend Lines





(1) Uptrend





When you draw trend lines in an uptrend, you draw them below the price.





During Uptrend



(2) Downtrend





When drawing trend lines in a downtrend, you draw them below the price.





During Downtrend



Important Points During Drawing Trend Line





* At least two swing highs of swing lows are needed to draw a trend line in either direction.





* The higher time frames will always produce the most reliable trend lines, so start there and work your way down.





* Most trend lines you come across will have some overlap from the high or low of a candle, but what's important is getting the most touches possible without cutting through the body of a candle.





* Never try to force a trend line to fit - if it doesn't fit the chart then it isn't valid and therefore not worth having on your chart.





Can I Use Candle Wick Or Bodies?





To draw trend lines, some traders use the bodies of the candlesticks, while the majority of people will use the wicks to draw trend lines, the use of the bodies is an acceptable way to draw trend lines on a chart.





Entry, Stop Loss, Target





* Entering when the price finds support or resistance at the trend line.





* Stop loss during buy side below support trend lines and during short side above the resistance trend lines.





* Book profit near trend lines support or resistance.





Time Frame





A stock can be in an uptrend and a downtrend simultaneously. The distinction comes from determining which time frame to prioritize. This is contingent or considering long term investors should prioritize longer time frames like weekly and monthly charts. Swing traders that takes positions for several days should prioritize the 60 minute and daily charts.





Day traders should prioritize Day traders times frames ranging from the 15 minutes to 60 minutes charts.





Summary





I hope this post has given you a better understanding of how to draw trend lines and how to draw trend lines and how they can be used in the stock market.