Always Respect The Trendlines As A Trader!

Prices trend. Trendlines are drawn by connecting two or more points of support and resistance. An uptrend means a series of price bars or candles exhibiting higher lows, higher highs or higher closes. Similarly, a downtrend means a series of price bars or candles showing lower highs, lowers lows or lower closes.

An uptrend line or support is drawn by connecting the higher lows with a straight line and extending that into the future. Similarly, a downtrend line or resistance is drawn by connecting the lower highs with a straight line and extending that into the future.

Trendlines are very important as they define the market parameters. Markets respect these trendlines that's why uptrendlines are also know as areas of support where buyers enter the market and the downtrendlines are also called areas of resistance where sellers take profit and start selling.

Now, as a trader, you need to understand this fact that there is a long term trend, intermediate trend and a short term trend. Accordingly, you need to draw a long term trendline, an intermediate term trendline and a short term trendline on your charts.

As the angle between the trendline and the price action increases, the likelihood of the market making a correction increases.

When the market makes a correction, a counter trend rally starts.

Once a market makes a counter trend move, we draw a new short term trendline. This new short term trendline will help you predict the next price correction. When you see the price angling away from the new trendline, the market is getting closer to making a counter trend correction.

A trendline can tell you when a trending market will revert to a counter trending correction. As each new trendline become steeper, it is time for the market to make a correction. It is unnecessary for you to know when that correction will happen. When you see the new trendline getting steeper, exit a portion of your position being mindful of the fact that prices have a tendency to migrate back to its longer term trendlines.

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