What is Trend Line?
A trend line is a diagonal line drawn on a chart connecting a series of higher swing lows (uptrend) or lower swing highs (downtrend) to visualize the direction of price movement.
Trend Line Explained
Trend lines are one of the simplest yet most effective technical analysis tools. A valid trend line needs at least two touch points, with three or more confirming its significance. When a trend line breaks, it often signals a change in trend direction. The more times a trend line is tested and holds, the more significant it becomes.
Real-World Example
A stock makes lows at $50, $55, $58, and $62 over four months. Connecting these points creates an upward trend line. A trader might buy when the price touches this line again, with a stop just below it.
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