Trend Lines are simple yet very effective technical analysis tool. But before introducing trendlines, lets familiarize ourselves with few key terminologies. Trend in a financial market signifies the general direction of the market. Unlike a straight line that represents direction in our real life, market directions are characterized by a series of zigzags.
These zigzags can be compared to a series of successive waves with distinct peaks and troughs. So when we speak of the market trend, we are speaking of the direction of those distinct peaks and troughs.
THREE DIRECTIONS OF TREND
Trend directions are categorized as: uptrend, downtrend, and sideways trend.
UPTRENDA series of successively higher peaks and troughs illustrate an uptrend.
DOWNTREND
A series of successivley declining peaks and troughs illustrate a downtrend.
SIDEWAYS TREND
If the trend is neither up or down then its sideways trend. A series of horizontal peaks and troughs illustrate sideways trend.
