Trend Lines and Price Channels

 

There are three types of trends in any market - Uptrend, Downtrend and Sideways.

Long term trend is measured on a bigger time-frame and it ignores short-term and very short-term price volatility of the market. While the short-term trend is measured for a shorter period from a few days to a few weeks or months.

Uptrend: When prices keep rising in an upward direction and after every correction, it resumes its uptrend.

Downtrend: When prices keep falling in a downward direction and after every correction, it resumes its downtrend.

Sideways: When prices trade in a range. Generally for short-to-medium periods.

Trend-Line: it is a visual display drawn on the chart to show the trend; normally it should touch at least three points on a chart. Trend-Line also helps to find support and resistance in any period. It shows the direction and speed of price and describes patterns during periods of price contraction.

In the below picture you can see all three trends.

An uptrend line touches the lows of candles while a downtrend line touches the high of candles.

In a sideways market, high of candles touch the upper trend-line and the bottom of candles touch the lower trend-line. Therefore, we draw two lines to show the sideways trend.

Price-Channel : Two parallel lines either in the upward, downward or in a sideways range make a channel.