Trend lines are the best tool to see how a price is developing or whether a trend or a trend breakout is imminent. If the price is currently in a trend channel, it often happens that the price moves relatively strongly against the trend in the short term. Day traders or scalp traders often use these price fluctuations. Spotting trends and trendlines correctly can be profitable, short-term gains enable. But the trend is also an important indicator for investors who are more committed to the long term.
The 3 basic types of a trend
With a trend channel you can draw two parallel lines in the chart. The course then often moves in a foreseeable way Period within the two parallels. Leaving this channel would then be a (short-term) trend breakout or even a trend reversal.
Support - support line
The support also represents a trend channel, but it runs horizontally. However, the lower line of the channel is more important here. Even with stronger price fluctuations, the price should not fall below this line if it develops downwards.
Resistance – line of resistance
This is also a horizontal trend channel, with the focus here being on the upper line. This line represents a resistance to the upside that the price will not break through anytime soon.