Trendlines
A trendline is a straight line drawn through two or more swing lows (an uptrend) or swing highs (a downtrend). It marks the slope of a trend.
How Trendlines is calculated
Pick two swing points, draw the line through them, and extend it forward. A third touch is read as confirmation. On a long chart, draw it on a log scale if percent moves matter, because a straight line on a linear scale curves on a log scale.
How it is read
A close beyond the line is read as a possible change in trend. The steeper the line, the less likely it is to hold.
Common mistakes
- Choosing points that make the line fit. Two traders will draw two different lines.
- Mixing linear and log scales and getting a different line.
- Redrawing the line every time it breaks, so it can never be wrong.
What Tickfloor tested
Tickfloor has not published a backtest of a rule built only on Trendlines. It describes or manages something rather than giving a signal, so there is no strategy to score. It still shapes how any tested rule should be read.
Lessons that cover it
Related concepts
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.