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What is a trend line?

Uptrend and downtrend lines

A trend line is one of the basic components of most technical analysis patterns. In order to construct a trendline, you simply need to connect either the high prices or low prices on an asset’s chart. The resulting line is the trendline.

There are two types of trendlines. An uptrend line is created by connecting the low prices for an asset, where the more recent low price is higher than the previous low price. A downtrend line is exactly the opposite, and is created by connecting the high prices for the asset, where the more recent high is lower than the previous high.  

Only two points are necessary to draw a trend line, but the more points are used in constructing the line, the more traders tend to consider it as a valid indicator of an asset’s overall trend.


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