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TRENDLINES
A trendline is the natural development in tracking a trend. It simply consists of a straight line connecting the significant highs (peaks also called cycle high)
or the significant lows (troughs also called cycle low). Following in the tracks of the trend directions, the trendlines may be classified as:
1. Rising trendlines
2. Declining trendlines
3. Sideways trendlines
Example on a chart:
To draw a trendline only two points are necessary.
The currency maintains its general direction and velocity. A trendline exists until it is broken as a result of a significant move
of the price up or down.
It is also important to know how to draw trendlines correctly, as they will act as support and resistance levels.
In an uptrend we always draw them by connecting dips that are making higher lows.
In a downtrend we connect tops that are making lower highs.
There are different trendline strengths that we also need to consider.
The strength of a trendline depends on the magnitude of our cycles.
The more candles that forms our cycles that are used to create the trendline, the stronger our trendline becomes. It means that it should hold much
longer in comparison to a trendline with lower cycle magnitude. Also, once it is broken, the trendline is likely to act as the opposite (for example, strong support becomes strong resistance, and strong resistance becomes
strong support).
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