Lessons › Market structure › Drawing a trendline
World 2 · Market structure · lesson 6 · level 2
Drawing a trendline
Connect the lows in an uptrend or the highs in a downtrend, and a third touch makes the line more trustworthy.
In one line
Two points make a line, but it takes a third touch to earn trust. Can you draw it right?
Explained simply
Imagine a ramp leaning under the dips of an uptrend: each time price falls back, it lands on the ramp and climbs again. A trendline is that ramp drawn on a chart. The more times price bounces off it, the more traders trust it.
The lesson
An uptrend line connects two or more rising swing lows, and a downtrend line connects two or more falling swing highs. Two points make a line, but a third touch that holds makes it more meaningful. Very steep lines break easily, and a break often means the trend is slowing rather than reversing. A good line passes through clean swing points instead of being forced through candle bodies.
A worked example
Illustrative example: an uptrend has swing lows of 100 on day 1 and 110 on day 11. The line rises 10 in 10 days, which is 1 per day ((110 minus 100) divided by (11 minus 1)). On day 21 the line sits at 120 (100 plus 20 days times 1). If price dips to 120 on day 21 and bounces, that is the line's third touch.
The same idea at four levels
- Beginner. Draw an uptrend line under rising swing lows, and a downtrend line over falling swing highs.
- Foundation. Two points make a line, but a third touch that holds makes traders trust it more.
- Intermediate. Draw through clear swing points and let the line pass the other candles without cutting through their bodies.
- Advanced. A very steep line breaks easily, and its break often means the trend is slowing rather than turning around.
- Expert. Experts treat a trendline as a zone, want a close and a new swing to confirm a break, and never bend the line to fit a wish.
Mistakes to avoid
- Forcing a line through random points so it fits your idea.
- Treating the break of a very steep line as a certain reversal.
- Redrawing the line after every break so it never looks broken.
Check yourself
Where do you draw an uptrend line?
Under rising swing lows. It connects the dips that keep rising.
Where do you draw a downtrend line?
Over falling swing highs. It connects the peaks that keep falling.
How many points do you need to draw a line?
Two. Two points make a line.
What makes traders trust a trendline more?
A third touch that holds. Each extra touch that holds adds evidence.
A line rises from 100 on day 1 to 110 on day 11. How much does it rise per day?
1. It rises 10 over 10 days.
Goal of this lesson: Draw a trendline through swing lows or swing highs and judge whether it is valid.