Module 13: Trendlines
Key Takeaways
- An uptrend line connects rising lows; a downtrend line connects falling highs.
- Channels add a parallel line on the opposite side of price.
- Breakouts signal possible trend changes or continuations.
Drawing trendlines
For an uptrend, connect at least two (ideally three) higher lows with a straight line; price tends to bounce off it. For a downtrend, connect lower highs. The more touches, the more valid the line. Avoid forcing a line through candles — it should touch wicks/bodies cleanly.
Channels
A channel is two parallel trendlines containing price. In an ascending channel, you can look to buy near the lower line and take profit near the upper line, trading with the trend. The opposite applies to descending channels.
Breakouts
A breakout occurs when price closes decisively beyond a trendline or channel. It can signal a trend change or an acceleration. Beware false breakouts — wait for a candle to close beyond the line and ideally a retest before committing.
Trendlines are subjective — ten traders may draw them slightly differently. Use them as guides alongside structure and S/R, not as exact triggers.
Frequently Asked Questions
Two are needed to draw it, three confirm it. The more reactions, the more reliable.