Trend lines are a useful method for visualising how price action is trending. To draw them we require at least three contact points. For an upwards trend, the trend line would be comprised of contact points made from higher lows of price action. A downwards trend would be a series of lower highs. During a period of consolidation, price action trends sideways between strong levels of support and resistance. Generally, a trend will persist until something happens to give either buyers or sellers the upper hand. Therefore, it is wise to trade with the trend, whilst looking for signals that a trend change is approaching – the trend is your friend, until the end.
Upwards Trend
Downwards Trend
Consolidation Period
Disclaimer: Nothing within this article should be misconstrued as financial advice. The financial techniques described herein are for educational purposes only. Any financial positions you take on the market are at your own risk and own reward. If you need financial advice or further advice in general, it is recommended that you identify a relevantly qualified individual in your Jurisdiction who can advise you accordingly.
