What Is a Trend Line Analysis?

A trend line is a line used by technical analysts to plot the past price movements of a security (stock) or commodity futures. The purpose is to predict future price changes. This straight line is formed by connecting the highest or lowest price point of a securities or commodity futures rise or fall in a specific period. The angle of the final straight line will indicate whether the securities or commodity futures are on an upward or downward trend. If prices rise above a downward-sloping trend line, or fall below an upward-sloping trend line, technical analysts generally believe that a new price trend is likely to emerge. It is generally believed that trend line analysis is a method of technical analysis. However, trend line analysis must be combined with other technical analysis to achieve better results. ^[1]

Trendline

A trend line is a line used by technical analysts to plot the past price movements of a security (stock) or commodity futures. The purpose is to predict future price changes. This straight line is formed by connecting the highest or lowest price point of a securities or commodity futures rise or fall in a specific period. The angle of the final straight line will indicate whether the securities or commodity futures are on an upward or downward trend. If prices rise above a downward-sloping trend line, or fall below an upward-sloping trend line, technical analysts generally believe that a new price trend is likely to emerge. It is generally believed that trend line analysis is a method of technical analysis. However, trend line analysis must be combined with other technical analysis to achieve better results. ^[1]

The trend line is the most common method among many methods of technical analysis, but at the same time the trend line has not been effectively and fully used.

If the trend line is drawn correctly, just like other technical analysis methods, it is very accurate. The problem is that most

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The trend line indicates when

Application of trend lines in futures trading:

Breakthroughs in trend lines are often used to analyze price movements, this is a new position, or is looking for opportunities

(1) First, you must find two high points (or low points) with different levels of high and low levels and a certain distance, and draw a tentative (or rising) straight line accordingly.

(2) If it is painting rise

(1)

Considerations when drawing trend lines

The so-called trend line is the line connecting more than two lows in the rising market and the line connecting more than two highs in the falling market. The former is called the upward trend line, and the latter is called the downward trend line. The function of the upward trend line is to show the support level of rising stock prices. Once the stock price falls below this line during the fluctuation process, it means that the market may reverse and change from up to down; the function of the downward trend line is to show the stock price Resistance to pick up during the decline,

Trendline

Once the stock price rises above this line in fluctuation, it means that the stock price may stop falling and rise. ^[7]

Investors should pay attention to the following points when drawing the trend line:

a. The trend line is divided into long-term trend line, medium-term trend line, and short-term trend line according to the length of the stock price fluctuation time. The long-term trend line should choose the long-term fluctuation point as the basis for drawing the line. It is recommended that the short-term trend line be connected using the fluctuation points of the 30-minute or 60-minute candlestick chart.

b. When drawing the trend line, try to draw different experimental lines first. After the stock price changes for a period of time, keep the trend line that has been verified to reflect the volatility trend and has analytical significance.

Trendline

c. Correction of the trend line. Take the correction of the uptrend line as an example. When the stock price quickly breaks above the trendline after breaking the uptrend line, one of the original lows should be connected to the new low to get the revised new uptrend line. , Can more accurately reflect the trend of stock prices.

d. The trend line should not be too steep, otherwise it can be easily broken through horizontally and break the analysis significance.

When judging the trend line, beware of the "traps" made by the dealer using the trend line. Generally speaking, before the stock price does not break the trend line, the uptrend line is the support for each decline, and the downtrend line is the resistance for each rise in the stock price. When the stock price breaks the trend line, there is a difference of more than 3% between the closing price and the trend line, and there is a matching volume. When the stock price breaks the trend line, if there is a gap, a reversal trend is likely to occur, and the stock price trend has a certain strength after the reversal. When the stock price breaks through the resistance of the downtrend line and rises, it usually requires the cooperation of a large volume, and when the stock price breaks down the uptrend line, the transaction volume generally does not increase, but the transaction volume sharply increases within a few days after the breakthrough.