Trend Lines

A corner stone in Technical analysis, Trend Lines are the main way traders use to define trends- their beginnings and their endings.

Why should I use it?

Many traders claim that simplicity is the only right approach to trading.
This is what Trend Lines are all about -simplicity! no averages, deviations or complicated calculations, just a straight clear lines running through the chart and defining the current trend.
Even if simple, a trend line can tell a lot about the market - when it is trending, where can you expect possible support and resistance level, and when a trend is potentially changing its direction.
Properly drawn trend lines have place in any serious Technical analysis you may perform in your trading.

How does it look like?

An uptrend (also called a bullish trend) is drawn under the price and is the meeting point of "higher lows" the market had since the beginning of the uptrend.
A downtrend (also called a bearish trend) is drawn above the price and is the meeting point of "lower highs" the market had since the beginning of the downtrend.

How does it work?

When the market is making a low, and then a higher low, you can draw a line connecting those two lows- this line would be a bullish trend line. Drawing it defines the current trend as an uptrend. The line it-self is serving as support to the price which is trading above it. If the price penetrates the trend line, a change in direction might be on the way.
When the market is making a high, and then a lower high, you can draw a line connection the two highs- this would be a bearish trend line. Drawing it defines the current trend as a downtrend. The line itself is serving as resistance to the price which is trading under it. If the price penetrates above the trend line, a change in direction might be on the way.

Example

Above, an example of how you should draw an uptrend line using a low, and then the next higher low. Notice how the trend line serves as support to the price whenever it is back to touch the trend line. A clear break under it will signal a possible change in trend.

This is an example of how you should draw a downtrend line, drawing a line between the highest high, and a lowest high which follows.