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What are Trend Lines?

Put very simply, trend lines are similar to that of support and resistance in the fact that they help us identify the direction of a trend and give us an idea of where the future price of a coin may be headed.

They consist of an uptrend line (bullish) or a downtrend line (bearish), and can be used in any market by drawing connecting peaks or valleys to find easily identifiable levels of support and resistance.

When drawn correctly, they can be devastatingly accurate and really give you the upper hand at identifying where price may be headed, so you can plan your entries or exits accordingly.

Uptrend Lines (Support)

Uptrend lines are the money makers.. They consist of a positive upward slope in which the second low is be higher than the first to indicate an upward buying pressure. To confirm this upward trend, three touches or points must be connected before the trend is truly considered valid and as long as the price remains above or on the trend line, the trend remain intact.

Downtrend Line (Resistance)

The opposite of the uptrend line is the downtrend line and it’s equally important in identifying potential trend reversals and is again confirmed by connecting 3 or more points on a chart.

The second high must be lower than the first to identify the downtrend. This downward trend line acts as resistance and tell us that the bears are in control of the market, with increased selling volume and decreased buying volume. 

How to Draw Trend Lines

As you draw your trend lines, use real bodies or wicks, or a slight combination of both. Trend lines will never be exact, buy try to focus on a common touch point.

When drawing your trend lines, focus on major swing points and ignore all the other noise on the chart. To confirm a trend line, 2 touch starts the trend and 3 truly confirms it. Just don’t go crazy connecting points that make no sense just to confirm your own bias. A LOT of beginner traders make this mistake…

don’t be one of them

Failed Breakouts (Don’t Get Caught..)

As we can see on the chart below (and just like we saw with support and resistance), price can often “break out” from these trend lines, which tells us that there may be a reversal coming. When these breakouts occur in a downtrend for example, only to return to trend a few candles later, it is called a “False breakout”.

One mistake new traders often make is buying or selling at the false breakout levels, which is why we wait for proceeding candles to close to really tell us which way the market is headed.

Buying / Selling on Breakouts

Breakout trading can be a very profitable way to trade, although it does require some time in front of the screens if you are planning on trading the smaller time frames.. but how does it work?

  1. In an uptrend, wait for the price to pull-back
  2. Using a trend line, connect your bodies or wicks
  3. If/when the price breaks through your trend line, buy the breakout

Better Time Your Entires Using Support and Resistance

Find better trading opportunities by being patient and trading near the trend line, whether you are buying OR selling.

This will improve your risk to reward ratio by allowing you to have a tighter stop loss on your trades. You can also use candlestick patterns as shown in episode 1 (bullish engulfing, morning star, doji) to better time you entry.

Pay Attention to Angles

The Steeper the trend line, the stronger it is. These steep trend lines occur after a sharp price move up or down and are unlikely to offer a meaningful support or resistance level.

Meaning the sharper the angle, the more unstable it could be short term, so take note of this when looking to enter a trade. A steadier longer-term trend line may yield better results for a beginner trader without having to worry about violent corrections.

POINTS TO REMEMBER:

  • The more times a trend line is touched, the stronger the trend is.
  • It takes TWO (2) to start a trend, but THREE (3) touches to confirm it – the more touches, the stronger the trend.
  • Focus on the major swing points
  • Don’t force trend lines to. Connect Wicks or Bodies, not both

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TODAY’S TOPIC

Pt -3 Mastering Trend Lines

Welcome to session 3 of the UTG Beginner Crypto Trader Series where we show you how to use trend lines

YOU’LL LEARN

  • What are Trend lines
  • Uptrends and Downtrends
  • How to Draw Trend lines
  • Identifying Breakouts and false breakouts
  • Why paying attention to angles matters. 

RESOURCES

TODAY’S TOPIC

Mastering Trend lines

Welcome to session 3 of the UTG Beginner Crypto Trader Series where we show you how to use trend lines

YOU’LL LEARN

  • What are Trend lines
  • Uptrends and Downtrends
  • How to Draw Trend lines
  • Identifying Breakouts and false breakouts
  • Why paying attention to angles matters. 

RESOURCES

Let’s dive in.. but before you do. Do you want loads of free beginner material, podcasts and all of our favourite free trading tools we personally use and recommend? Join us on discord

What are Trend lines?

Put very simply, trend lines are similar to that of support and resistance in the fact that they help us identify direction of a trend and give us an idea of where the future price of a coin may be headed.

They consist of an uptrend line (bullish) and a downtrend line (bearish), and can be used in any market by drawing connecting peaks or valleys to find easily identifiable levels of support and resistance.

When drawn correctly, they can be devastatingly accurate and really give you the upper hand at identifying where price may be headed, so you can plan your entries or exits accordingly.

Uptrend lines (Support)

Uptrend lines are the money makers.. They consist of a positive upward slope in which the second low must be higher than the first to indicate an upward buying pressure.

To confirm the upward trend, three touches or points must be connected before the line is truly considered to be valid.

This upward trend shows us that demand is higher and the bulls have a hold of the current market.  As long as the price remains above or on the trend line, the trend remain intact.

Click to open bigger version of images

Downtrend lines (Resistance)

The opposite of the uptrend line is the downtrend line. It’s equally as important in identifying potential trend reversals and is again confirmed by connecting 3 or more points on a chart.

The second high must be lower than the first for  to help us identify the downtrend. This downward trend line acts as resistance and tell us that the bears are in control of the market, with increased selling volume and decreased buying volume. 

How to Draw Trend Lines

As you draw your trend lines, choose to either use real bodies or wicks, or a slight combination of both. Trend lines will never be exact, buy try to focus on a common touch point.

When drawing your trend lines, focus on major swing points and ignore all the other noise on the chart. 

Just don’t go crazy connecting points that make no sense simply to confirm your own bias. A LOT of beginner traders make this mistake…

don’t be one of them

False Breakouts

As we can see on the chart below (and just like we saw with support and resistance), price can often “break out” from these trend lines, which tells us that there may be a reversal coming. When these breakouts occur in a downtrend (for example), only to return to trend a few candles later, it is called a “False breakout”.

One mistake new traders often make is buying or selling at the false breakout levels, which is why we wait for proceeding candles to close to really tell us which way the market is headed.

Buying / Selling Breakouts

Breakout trading can be a very profitable way to trade, although it does require a little more time in front of the screens if you are planning on trading the smaller time frames.. but how does it work?

  1. In an uptrend, wait for the price to pull-back
  2. Using a trend line, connect your bodies or wicks
  3. If/when the price breaks through your trend line, buy the breakout

Better Time Your Entries Using S&R

Find better trading opportunities by being patient and trading near the trend line, whether you are buying OR selling.

This will improve your risk to reward ratio by allowing you to have a tighter stop loss on your trades.

You can also use candlestick patterns as shown in episode 1 (bullish engulfing, morning star, doji) to better time you entry.

Pay Attention to Angles

The Steeper the trend line, the stronger it is. These steep trend lines occur after a sharp price move up or down and are unlikely to offer a meaningful support or resistance level.

Meaning the sharper the angle, the more unstable it could be short term, so take note of this when looking to enter a trade. A steadier longer-term trend line may yield better results for a beginner trader without having to worry about violent corrections.

Bonus Tips:

  • The more touches on trend, the stronger it is
  • It takes two (2) touches to start the trend, buy three (3) touches to confirm it
  • Focus on major swing points and connect bodies or wicks… not both. 

Thanks for Reading!

Available From Our Disord Only

Join Our Dedicated Beginner Channel in Discord

Ask questions and get answers from team Unity and our trading OG’s inside our dedicated beginner trader discord channel, with LOADS of bonus beginner trading content & more!

Join Our Dedicated Beginner Trader Discord

Ask questions and get answers from team Unity and trading OG’s inside our dedicated beginner trader discord channel, with LOADS of bonus trading content & videos.

* 2018 Unity Trading Group PTY LTD. The information on this website has been created by Unity Trading Group (ABN: 630163343) for general information and educational purposes only and is not to be constructed as personal or financial advice. All forms of trading carry a high level of risk, and may not be suitable for all investors. Before deciding to trade any market reported on by Unity Trading Group you should carefully consider your objectives, financial situation, needs, and level of experience. By trading, you could sustain a loss in excess of your deposited funds. Before trading ASX/FX/Cryptocurrency markets you should be aware of all the risks associated with trading. Unity Trading Group recommends you seek advice from a separate financial advisor before making any decisions based on the general information given on this website or affiliated platforms.

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