Trendline
In what direction does the market move on is the main principle of making decisions for every trader. Logically, traders tend to buy an uptrend share with the hope of gaining profit or exiting a downtrend market to prevent further losses. In technical analysis trend of the market can be easily demonstrated by drawing trendlines. The trendline is a guidance line that is drowned over the price chart and can connect the lowest or highest peaks of the diagram. Two swing points are enough for drawing a trendline, but the third and more points confirm its validity and strength. But confirmation by itself doesn't prove successful trading. In the following, brief steps of drawing trendlines on the price chart are mentioned.
To Draw an Uptrend Line...
- Find at least three sequence swing low points on the price chart.- from the toolbar and draw the line.
- Try to connect the most dominant and obvious swing low points, not the small turning point.
- If the trendline goes up from left to right and the slope is positive, the trend is increasing and has an upward direction.
To Draw a Downtrend Line...
- Find at least three sequence swing high points on the price chart.
- from the toolbar and draw the line.
- Try to connect the most dominant and obvious swing high points, not small climax.
- If the trendline goes down from left to right and the slope is negative, the trend is decreasing and has a downward direction.
A sample of down and uptrend is brought here:
Comcast Corporation, Daily chart (2021-2022)