Trend lines can be used to identify and confirm trends. A trend line connects at least 2 price points on a chart and is usually extended forward to identify sloped areas of support and resistance. Lines with a positive slope that support price action show that net demand is increasing. As long as the price action stays above this line, we have a bullish trend. Lines with a negative slope that act as resistance to the price action show that net supply is increasing. As long as the price action stays under this line, we have a bearish trend.

Price usually retests a sloped trend line several times, until it breaks at which point we may have a trend reversal. The more points there are to connect, the stronger a trend line becomes. Different strategies have different rules on how far apart connected price points can be and whether to connect wicks or candle bodies, but all trend lines break eventually. TradingView has a smart drawing tool that allows users to visually identify trend lines on a chart. This tool can also be used to illustrate trends on indicators.

Types of Trend Lines

There are two types of trendlines: ascending and descending.

Ascending Trend Line

An ascending trend line or uptrend line is formed by connecting the lows, where the more recent low price is higher than the previous low price.

An ascending trend line extends into the future and can be thought of as a level of support.

Lines with a positive slope that support price action show that demand (more buyers than sellers) is increasing.

As long as the price action stays above this line, we have a bullish trend

Descending Trend Line

A descending trend line or downtrend line is exactly the opposite of an ascending trend line.

It is formed by connecting the highs, where the more recent high is lower than the previous high.

A descending trend line extends into the future and can be thought of as a level of resistance.

Lines with a negative slope that act as resistance to the price action show that supply (more sellers than buyers) is increasing.

As long as the price action stays under this line, we have a bearish trend.

Trend Line Breaks

The popular approach to trading trend lines is that if price bounces upward off trend line’s support, and downward off a trend line’s resistance.

Price usually retests a sloped trend line several times, until it breaks.

When a trendline is broken, especially with high volume, the momentum will push the price significantly above/below the broken trendline.

When this happens, this signals a trend reversal.

Traders have different opinions on how far apart connected price points can be and whether the trend line should connect to a candlestick’s wick or body.

Regardless of your approach to constructing trend lines, just know that all trend lines eventually break.