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Trendlines
A straight line connecting two or more points to show direction, and the subjectivity that comes with it.
A trendline is a straight line connecting two or more points on a chart to show the overall direction of price and the rough channel it is trading within. Trendlines can mark an uptrend, a downtrend, or a sideways channel.
The main weakness, subjectivity
Drawing a trendline is inherently subjective, there is no single correct way to draw one. Two traders looking at the same chart can draw two valid but different trendlines. This is the tool's core limitation, and it argues against relying on trendlines alone.
Reading trend health
A healthy uptrend tends to look like a staircase, a sequence of steady higher lows. A parabolic, near-vertical move is not a healthy trend structure and warrants caution rather than confidence. Sideways channels, where price repeats similar highs and lows, usually represent consolidation ahead of a larger move; a breakout eventually resolves the range in one direction.
Using trendlines like support and resistance
Trendlines function the same way as horizontal support and resistance, just on a diagonal axis, buying near an uptrend line and selling near a downtrend line mirrors buying at horizontal support and selling at horizontal resistance.
Related concepts
Wedge chart patterns are essentially converging trendlines. Trendline breaks are one of the most common triggers used in breakout trading.
Key takeaways
- Trendlines connect two or more points to show trend direction and channel.
- Drawing them is subjective, don't treat a single trendline as an objective signal.
- A staircase structure of higher lows signals a healthy trend; a parabolic move signals caution.
- Sideways channels typically precede a directional breakout.
- Trade trendlines the same way as horizontal support/resistance, just diagonally.