Posted: 01.07.2021 | 09:19
What are Trendlines?
Trendlines are lines drawn above or below pivot levels to show the current price direction. These lines are a visual representation of support and resistance in any time frame. By connecting certain dots, it makes it more understandable and easier for chart users and traders to visualize price movements as well as identify market trends. Trendlines are one of the most fundamental tools of technical analysis (TA).
trend lines; It is mostly used in the securities, fiat, derivatives and cryptocurrency markets. Trendlines basically work like support and resistance levels, but consist of curves instead of horizontal lines. Therefore, it can have a positive or negative slope. Generally, the steeper the slope of a line, the stronger the trend.
Train lines fall into two basic categories: an ascending (uptrend) and a descending (downtrend) line. A curve with an uptrend is drawn from a graph point to a higher point. These lines connect the two troughs. A downward trending curve is drawn from a higher point to a lower point on the chart. Joins two or more vertices.
HOW TO USE TREND LINES?
The trendlines based on the lows and highs of the chart show at which points the price briefly breaks out of the ongoing trend, forces the trend, and then reverts. The line can be extended to predict important levels ahead. The trendline is considered valid as long as it is not broken. Although trend lines are used in all data charts, they are often associated with market prices. This means that it is possible to get an opinion about the market supply and demand thanks to the lines. In such analyzes, the trading volume should be taken into account. The uptrend curve shows support levels where the price will not drop to possible lower levels. The downtrend curve shows resistance levels where the price cannot make any possible higher highs. In other words, the market trend is now considered invalid when the support and resistance levels are broken to the upside or downside. The market now tends to change direction.
Drawing Current Trendlines
Although trendlines technically connect two points on the chart, using three or more points validates a trendline. In some cases, the first two points are used to potentially identify a trend. A third point can also be used to test the validity of the line. A trend is considered valid if the price touches and crosses a trend line three or more times.
Apart from choosing a sufficient number of points to create a valid trend line, it is also important to use appropriate halves when drawing these lines. One of the most important graphics settings is scaling. In financial charts, scale depends on how changes in price are displayed. The two most well-known types of scales are the arithmetic scale and the quasi-arithmetic scale. In the arithmetic chart, the movement of the price up or down the y-axis is explained in a straight way. In a semiarithmetic chart, changes are expressed as percentages.
Scale settings should be taken into account when drawing trend lines. Each chart type can create different lows and highs, and slightly different trend lines can emerge. While trend lines are useful for technical analysis, they are not necessarily error-free. Therefore, it is important to use these lines with other indicators.