Definition – What does Trendlines mean?
A trendline is a technical analysis tool where a line is drawn to connect a series of data points to provide a visual picture of the direction that price action is taking. Simply put, a trendline connects either the highs or the lows of a currency pair’s price action to show the trend. Pivot points or other customized points can be used instead of simple highs and lows.
ForexTerms explains Trendlines
Trendlines are very useful in that they allow traders to see both the direction and the strength of a trend with a glance. The more sharply a trendline angles up on an uptrend, the stronger the uptrend. The sharper the downward angle on a downtrend, the stronger the downtrend. That said, trendlines – like any technical analysis tool – are very sensitive to changes in timeframe, so a 5-minute chart can show an upward tilting trendlines even if the 1-hour chart shows an overall downward slope. Currency traders can use multiple trendlines on multiple time frames to quickly summarize past price action over these timeframes, but the number of trendlines can be overwhelming.
One of the most useful applications of trendlines is the use of a trendlines at highs and another at lows to create a channel that represents support and resistance over a given timeframe.
