Today we will discuss trend lines

1: How to draw a good trend line? Trend lines are one of the basic skills for trend traders. How to correctly draw a trend line? First, understand the essence of trend lines. For example: (Figure 1) When an uptrend forms, the lows keep getting higher, and the highs also keep getting higher, i.e., higher highs and higher lows. Conversely, a downtrend (Figure 2) shows that the highs keep decreasing, and the lows are also decreasing. Therefore, the essence of a trend line is to track the changes in high and low points over a certain period.
2: What are the conditions for forming a trend? A trend line must connect at least three points. Connecting only two points may be coincidental; connecting three or more points confirms that the price has tested the line at least three times and retreated, indicating an inertia pressure zone rather than coincidence. The more points connected, the more reliable the trend line. Drawing lines is essentially about finding market consensus. The more points connected, the stronger the collective market consensus. For example, a trend line connecting 5 points is more reliable than one connecting 3 points because the underlying market forces are stronger.
3: The cycle trend line should include at least 3 weeks of K-line data, preferably more than 7 weeks. The longer the cycle, the more reliable.
4: The slope of the trend line should be relatively flat, avoiding overly steep slopes. When the price breaks through a flat trend line, the reversal opportunity is high. If the trend line is too steep, supply and demand are still strong, and after the breakout, it often only enters a sideways consolidation.
5: In practical use, first draw a reliable trend line: connect at least three points, with a cycle longer than 3 weeks, and it should be relatively flat. For example: (Figure 3), when the price breaks through a downward trend line with high trading volume, you can buy at this point, with a stop loss set below the previous candle. Breakouts should be accompanied by high trading volume or buy support. If the price starts to rise, short-term trading uses the 20-day moving average (blue line) as the profit-taking basis. This moving average can judge the short-term trend; as long as the closing price stays above it, hold the position; once the closing price falls below, sell.