Fitting a trendline

A trendline is a straight line that makes the rhythm of a trend visible: under the swing lows in an uptrend, over the swing highs in a downtrend. Two points define the line; a third touch counts as evidence that the market genuinely "sees" it and earns the line credibility. On a chart you first mark the obvious lows or highs, connect at least two of them and extend the line to the right. The rule is simple: the line must fit the data, and the data must never be forced onto the line. If you are moving the line for the fifth time to make it sit on price, there is probably no trend clean enough for the tool to reveal — which is information in itself. The common misreading is to treat the line as a ruler-exact boundary; think of it as a narrow zone rather than a thin line, because price poking a few points through it with a wick proves nothing on its own. The lesson for risk literacy: how hard you have to push a line is a measure of how much you trust your wish rather than the trend.

This content is educational information, not personalised investment advice. The chart examples are illustrative.

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