Trend Lines & Channels
Draw and trade with trend lines and price channels
4 sections · 3 quiz questions · ~5 min read
Drawing Trend Lines
Connect two or more swing lows in an uptrend (ascending trend line) or two or more swing highs in a downtrend (descending trend line). The more touch points, the more valid the trend line.
Uptrends & Downtrends
An uptrend makes higher highs and higher lows. A downtrend makes lower highs and lower lows. Trade in the direction of the trend — "the trend is your friend." Counter-trend trading is for advanced traders only.
Price Channels
A channel forms when you draw parallel lines along the highs and lows of a trend. In an ascending channel, buy near the lower line and take profit near the upper line. Channels help define the rhythm of a trend.
Trend Line Breaks
When a trend line breaks with strong momentum and volume, it signals a potential trend reversal. Wait for a retest of the broken trend line as new support/resistance before entering a trade in the new direction.
Quick check
Did it stick?
Try to answer each one before you peek at the explanation.
1
How many touch points minimum do you need for a valid trend line?
2
An uptrend is defined by a series of higher highs and higher lows.
3
Match the concept to its description:
Ascending Channel→Parallel upward lines
Trend Break→Potential reversal signal
Higher Low→Sign of an uptrend