Trend Lines: The Tool Every Trader Needs to Master

Why should it matter to you?

If you trade in crypto, stocks, or futures, you’ve probably heard about trend lines. But here’s the truth: many traders draw them incorrectly and then wonder why their analyses don’t work.

What are they really?

Forget about boring definitions. A trendline is literally a diagonal line that connects the highs ( or lows ) of the chart. It acts as support or resistance, but diagonally instead of horizontally.

Two basic types:

• Bullish: draws from the lows upwards (buyer in control)
• Bajista: draws from the highs downwards (seller in control)

The steeper the slope, the stronger the trend. Simple.

How to take advantage

Trend lines show you where the price touches the line, tests it, and then bounces back. That is your signal. Extend the line forward and you have key levels for the future.

The magic number is 3: a line that holds 3 or more touches without breaking has real analytical weight. If there are only 2 points, it's just a potential trend. Three or more touches = something is really happening.

Volume speaks for itself

This is where many people get burned. If the price goes up but the volume decreases, the bullish “trend” may be fake. Always check: is there really money coming in?

The complicated part (but important)

Not everyone draws lines the same way. Some use the body of the candle, others the wicks. That's why:

• Combine trend lines with other indicators (Ichimoku, Bollinger Bands, MACD, RSI)
• Consider the scale: arithmetic graph vs semilogarithmic graph yield different results
• In a semilogarithmic scale, a 100% gain looks larger than an increase of $5

Bottom line

Trend lines are powerful, but they are not a crystal ball. They are subjective and work best when combined with fundamental analysis and other indicators. Use them as a tool, not as an absolute truth.