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Analysis

What is Trendline?

Trend chizig'i

In short

A line connecting a trend's lows (or highs). Two parallel lines form a trend channel.

Also known as: channel, kanal

A trendline is a straight line connecting a trend's lows (in an uptrend) or highs (in a downtrend). It shows the slope of the trend and where price is being "supported". Unlike horizontal levels, a trendline is sloped — its price changes over time.

How to draw it

  • In an uptrend: connect at least two rising lows.
  • In a downtrend: connect at least two falling highs.
  • A third touch confirms the line — any two points can be joined by a line.

Drawing a second, parallel line on the opposite side creates a trend channel: price moves between the two lines.

How it is used

  • When price approaches the line — a chance to enter in the trend's direction, with the stop beyond the line.
  • When the line breaks on a close — a warning that the trend is weakening (but not yet a reversal).
  • Channel boundaries — targets and places to take partial profit.

Limitations

Trendlines are subjective: different traders draw them differently (through wicks or through bodies). Very steep lines break quickly. And after a break, price often continues the trend at a new, gentler slope. That is why trendlines work best alongside horizontal support and high/low analysis.

A rising channel
$100$105$110$115Lower line — the trendlinetoptoptopbuybuybuy

The lower line connects the lows ($100 → $103 → $106 → $109), the upper line the highs ($105.50 → $108.50 → $111.50); the channel is about $4 wide. Buy near the lower line, take some profit near the upper line.

Example

Illustrative case: an uptrend on the daily chart, with lows at:

  • Week 1: $20,
  • Week 4: $22,
  • Week 7: $24.

All three sit on one line rising $2 every 3 weeks. So by week 10 the line should be around $24 + $2 = $26.

If in week 10 price dips to $26.30 and bounces, the line is confirmed again (a fourth touch). If price closes at $25, clearly below the line, that is a warning that the trend is slowing — but for the trend to end, the last low ($24) also needs to break.

Mistakes and tips

  • Don't force a line to fit — if drawing it means ignoring many candles, it isn't reliable.

  • Draw consistently: always through wicks or always through bodies.

  • Don't flip to the opposite position the moment a line breaks — price often just moves sideways.

Frequently asked questions

How many points do you need to draw a trendline?
Two points are enough to draw it, but a line is considered reliable only after at least a third touch.
Is the trend over if the trendline breaks?
Not necessarily. It is a sign the trend is slowing; a break in the sequence of highs and lows is a better signal that the trend has ended.

Learn it in the Academy

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