Trendline

A trendline is a graphical tool used in technical analysis, drawn directly on a price chart. It connects a series of higher lows in an uptrend or lower highs in a downtrend. For a trendline to be considered valid, it typically requires at least two, and ideally three or more, points of contact. This line visually represents the prevailing direction of price movement.

For retail traders, trendlines serve as dynamic support and resistance levels, aiding in identifying potential entry or exit points for trades. However, drawing trendlines can be subjective, and false breaks are common, leading to premature trade entries or exits. Traders must use robust risk management, such as a defined stop-loss, and combine trendlines with other technical indicators to confirm signals and mitigate risk.