Trading glossary
A trendline is a straight line drawn across two or more price points on a chart to help visualize the direction, slope, and pace of a market trend.
A trendline is one of the simplest tools in technical analysis. It is a straight line drawn on a price chart to connect a series of highs or lows, giving a visual sense of the market's direction. An upward trendline connects rising lows, while a downward trendline connects falling highs. The line helps a viewer see the slope and pace of a move at a glance.
A trendline generally needs at least two points to be drawn and a third touch to add credibility. The more times price approaches the line without decisively breaking it, the more attention traders tend to pay to it. Because charts can be scaled differently, two people may draw slightly different lines from the same data, so trendlines are interpretive rather than exact.
Trendlines are often treated as moving areas of potential support or resistance. Traders watch how price behaves as it nears a line and whether it holds or breaks through. A break of a well-established trendline can draw interest as a possible shift in direction, though it does not guarantee one. Trendlines are usually combined with other observations rather than used alone. This is educational information, not personalized advice, and markets involve risk including the possible loss of capital.
At least two points are required to draw a line, and a third touch is often used to confirm it. More touches generally lead traders to regard the line as more meaningful, though this is a matter of judgment.
A break can suggest the prior trend is weakening or shifting, which is why traders watch these events. However, breaks can be false, so a broken trendline is a prompt for further analysis rather than a definitive signal.