Trend Line is one of easiest yet most ignored way of trading in technical analysis. This is because most of the retail traders are not aware that trend line trading signal can be used in all forms of trading such as day trading, swing trading or even positional trading.
In order to understand the easy concept of trend line based trading, it is recommended that you go through the complete article tutorial.
What is Trend Line?
I think most of you would be aware that support and resistance lines are horizontal. For instance, here is an almost correct support line for RELIANCE (NSE).
Similarly, trend line is also straight line but it isn’t horizontal or vertical. Trend line is usually with a slope.
Uptrend : A Security is said to be in uptrend when the slope of trend line is positive.
Downtrend : A Security with negative slope trend line is considered to be in downtrend.
Below is an example of trend line is short term for AXISBANK (NSE)
How to Draw Correct Trend?
While above example of trend line for AXISBANK is not best example, here are the rules or points to follow to create a correct trend line.
- We need to focus only on the major swing points. All other points over the chart must be ignored.
- A trend line is good as number of swing points connect. Remember, we need to connect at least 3 major swing points.
- Adjust it so that you get the most number of touches (whether it’s body or wick)
So if we use trend line along with support and resistance, we can get really good entry point, exit point and stop loss trigger prices.
We will articulate about entry point with both trend line and support/resistance seperately. Hope this was helpful.