How to make money using Trend Line

Trend Line

A trendline is a line connecting two lows if the market is bullish, and two highs if the market is bearish.

Trend line indicates the resistance line and support line respectively. Higher resistance (or support) is correlated with higher probability of rebound. However, in case the resistance line (or support) breaks out, there might be also high chance of trend reversal.

Trend line

In addition, the probability that A and B are equal becomes higher if you draw a straight line that connects the previously overlapping points and parallels to the high and low past prices respectively.

This line will become a strong support (or resistance) line depending on the most recent trendline. In the event of strong breakout, there might be also high chance of trend reversal.

However, beware of the “trick” that the trendline has broken out.

  • Draw a straight line connecting two lows if the market is bullish
  • Draw a straight line connecting the two highs if the market is bearish
  • The trendline might rebound, but the probability of trend reversal is also high if the trendline breaks out