How Do I Interpret Charts using Trend Lines?

How to Analyze Charts using Trend-Lines

To interpret charts using trends traders will have to first identify a stock trend.

How Do you identify a stock trend on a chart - to identify a stock trend on a chart traders will need to learn the correct way of determining a trend - a trend is a general price direction in the price movement where price movement is either up/down.

When the trend is moving upwards it means that stock price movement is moving higher and indices prices are closing higher than where they opened and hence the general price trend direction of prices is upwards.
When the trend is moving downwards it means that stock price movement is moving lower and indices prices are closing lower than where they opened & therefore the general price trend direction of price movement is downward.

To identify and spot a trends on charts traders will use a series of price highs or stock price lows.

Traders will then draw a trend line connecting price highs or stock price lows & this trendline will then determine the direction of the trend whether up or downward.

Upwards Trend

To identify and spot an upwards trend-line on charts -indices traders will identify price lows which are sloping upwards and then use these price lows to draw a trendline - upwards trend-line to connect these price lows & once this upwards trend-line is drawn on the chart it then will be used to identify the upwards trend.

Drawing a Upward Trendline - How Do I Analyze Charts using Trend Lines?

When the price moves upward it forms higher highs & higher lows forming an upward movement of price. An upwards trend-line can then be plotted by connecting/joining the price higher lows.

To draw this upwards trend line - we use support zones. To plot the upwards trend line correctly 2 support zones on price chart are needed.

How to Analyze Charts using Trendlines - How to Analyze Charts using Trend Lines

Upward Trend Line on Chart

Downwards Trend

To identify and spot a downward trend line -indices traders will identify price highs that are sloping downwards and then use these price highs to draw a trend line - downward trend line to connect these price highs & once this downwards trend line is plotted on a chart it then will be used to identify the downwards trend.

Drawing a Downward Trendline

In learning how to draw trendlines and determining/figuring out trends on charts, you need to know that when price movement are moving they form lower lows & lower highs forming a downward price direction. These are points which are then used to plot the downwards trend-line.

To determine a downwards trend - we use resistance areas to draw a downward trend line & to identify a downwards trend correctly 2 resistance levels on chart are needed.

How to Analyze Charts using Trend Lines - How Do I Analyze Charts using Trend Lines?

Downward Trend Line on Chart

Once traders draw and determine a market trend using trend lines -indices traders will then open stock trades in the direction signal of the trend. This is because once price movement start to head in a market trend direction either up-ward or downward - the price movement will keep heading in this direction for quite a while.

How Do I Analyze Charts using Trend Line?

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