Level 2
The concept of trend and trendlines
By the end of this level you can mark the peaks and troughs yourself and say whether a market is trending up, trending down, or moving sideways.
In this level
- What is a trend?Price does not travel in a straight line; it moves in waves. The top of each wave is called a swing high, the bottom a swing low. A trend is the overall direction you read from…
- Drawing a trendlineA trendline is a straight line that makes the rhythm of a trend visible. In an uptrend it is drawn under the swing lows; in a downtrend, over the swing highs. Two points are the…
- Sideways marketsFor a large share of the time, markets neither rise nor fall; they oscillate inside a band. This is a sideways market, or range: the highs sit at roughly the same level, and so do…
- What a break says — and what it does notWhen price closes on the other side of a trendline, that is called a break. The traditional reading is this: the rhythm of the trend has been disturbed, and the existing order is…