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Simplest technical tool there is
Line, overlaid on the graph connecting the highest peaks or lowest bottoms of price action
Ascending trendline or descending
The idea: if price breaks above or below the line, a potential change in trend is signaled
Validity
Must connect 2 or more peaks or bottoms. More lines of “contact” the stronger the line (and emotional signature for traders actions)
Connecting the close of bars, not the wicks (extremes)
Indicates points traders were willing to hold their positions vs extremes that didn’t hold
Length = strength
Change in trend signal doesn’t mean to act, merely an indication to monitor price action
May be a complete reversal, consolidation (sideways) or become more aggressive (steeper trends harder to maintain)
Pro-tips:
volume provides a clue to strength of trendline violation
A break with low volume indicates less enthusiasm among traders and potential false breakout, or whipsaw
Extended trendlines: can extend line out past current time period to anticipate movement (not guaranteed though)
Support becomes resistance
Forming channels when possible (trend line above and below a trend)
Potential to trade in-between channel and spot exhaustion at support for reversals
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WHAT’S THE KEY: Learn → test → “perfect” → Scale up = $$$
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