Trend lines are rare and strong. They are drawn using higher lows in an uptrend and lower highs in a downtrend. A good trend line has a maximum of multiple points touching both the wick and candle body combined.
Types of Trendline:
1. Uptrend line:
An uptrend line has a slope upward and is formed by connecting two or more low points. Uptrend lines act as support.
2. Downtrend Line:
A downtrend line has a slope downward and is formed by connecting two or more high points. Downtrend lines act as resistance.
*How to Draw a Trend Line?
1. The first thing to know about drawing a trendline is that you need at least two points in the market to start a trendline.
2. The two points can be either support or resistance. From that, we come to know which trend is following either an uptrend or a downtrend.
3. The lows used to form an uptrend line and the highs used to form a downtrend line should not be too far apart, or too close together.
FAQ on Trendlines:
1. On what timeframe to do a trend line?
Ans: Trendline can be drawn from any timeframe, like 5 minutes, 15 minutes, 30 minutes, 1 hour, 4 hours, 1 day, etc.
2. What happens when a trendline breaks?
Ans: When the trendline breaks, the trend changes.
3. Why can’t we short an up-trending market when it hits the upper trend line?
Ans: We can’t short an up-trending market because it can make an even higher high and break the line.
4. Can we use a trend line as an entry for a trade?
Ans: Yes, we can use a trend line as an entry.
5. Can we use the trendline as a target for trade?
Ans: Yes, we can use the trend line as a target for trade.
6. Can we use the trendline to put our stop-loss?
Ans: Yes, we can use the trendline as a stop loss for a trade.
7. How many points are needed for a valid trendline?
Ans: We need a minimum of two points for a valid trend line.
8. If I draw a trendline on a 1-hour timeframe, will it change when I change the timeframe to 15 minutes?
Ans: In all timeframes, the trend is the same; it is just that in lower time frames, you will see more candles compared to higher timeframes.
9: Between the wick and body, what should be touched on the trendline and horizontal lines?
Ans: A combination of both is OK.
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