How to Identify Trading Trendlines

A trend can be up, down, or lateral and is represented by drawing a straight line above the daily highs in a downward trend and a straight line below the daily lows in an upward trend. See Figure below.

[caption id="attachment_13087" align="alignleft" width="370"]Bar Chart with Trendlines Bar Chart with Trendlines[/caption]

A common trading technique involves the intersection of the trendline with the most recent prices.

If the trendline for a downward trend crosses through the most recent prices, a buy signal is generated. Conversely, if the trendline for an upward trend passes through the most recent prices, then a sell signal is generated.

By Michael Duane Archer
Michael Duane Archer has been an active futures and FOREX trader for more than 35 years. He has worked in various advisory capacities, notably as a commodity trading advisor, registered SEC investment advisor, and branch manager for Heinold of Hawaii. He currently trades FOREX and futures and is involved in several technical analysis research projects.

Copyrighted 2016. Content published with author's permission.

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