Candlestick Trading Blog

---

Stock trend lines may show an uptrend or a downtrend, but are basically lines that connect a series of highs or lows. These lines confirm a trend and when they are drawn they are drawn along at least two relative highs or lows. These trend lines can either be slanted or horizontal as they rise. The study of these trend lines is known as trend analysis and trend analysis is an important technical analysis tool used by many stock traders.

As trend lines first begin to form, they sometimes require redrawing in order to ensure that that important lows and highs are connected. Trend lines that are mature rarely need to be adjusted or redrawn and the steeper the line's angle, the less reliable the stock trend is. Trend lines, used in stock technical analysis, are typically good places to initiate trading positions with low-risk entry when stock trading. This is due to the fact that when the trend line is breached it results in a break in the trend and therefore an exit signal is provided.

When trend stock trading, there are two types of trend lines used. The first that we will discuss include the uptrend lines. Uptrend lines are seen when a stock makes repeated higher highs and repeated higher lows. This results in a price advance which trends higher and this trend ends when a series of higher highs and higher lows ends. This uptrend formation ends with the formation of a lower high or a lower low. When analyzing the repeated higher highs and higher lows as you trade stock, traders must be sure that each relative high is above the former high, and conversely that each low is higher than the former low. When identifying the stock trend, the uptrend gains more validity each time the price touches but does not breach the uptrend line.

The other type of trend line used when trading stock online is the downtrend line. Downtrend lines are seen when a stock makes repeated lower lows and lower highs. This results in a price decline and the trend ends when a series of lower lows and lower highs ends. This downtrend formation ends with the formation of a higher low or higher high. When analyzing the repeated lower lows and lower highs, traders must be sure that each relative low is below the former low, and that each relative high is below the former high. When identifying the stock trend, the downtrend gains more validity each time the stock price touches but does not breach the trend line.

Website Specials