How To Draw a Trendline? (or) How To Draw a bullish and bearish Trendline?
How To Draw a bullish and bearish Trendline?
How To Draw A Trendline?
- Connect the latest two obvious valleys (swing lows) and peaks (swing highs).
- These valleys and peaks must be clear and obvious. If they are not, consider them as pauses. If they are not clear basing should be unclear and poor and removal would be expected anyway.
- Update the trendline every time there is a new valley or peak
- Each timeframe has its own trendline independent from other timeframes and this is where subjectivity comes into in other methodologies
- Continuation Patterns (CPs) will not be used to connect trendlines unless there are 3 or more (over-extension)
How To Draw A Bullish Trendline?
- Locate current price and the highest high closest to current price. Move down and left and locate the last clear valley. That will be our first valley
- Continue to move down and left, and stop when you see another valley lower than previous valley, that will be our second valley.
- Connect the two valleys with a bullish trendline
- Update the trendline every time there is a new valley whose second leg out makes a higher high than the upper valley’s second leg high
How To Draw A Bearish Trendline?
- Locate current price and the lowest low closest to current price. Move up and left and locate the last clear peak. That will be our first peak
- Continue to move up and stop when you see another peak higher than previous peak, that will be our second peak
- Connect the two peaks with a bearish trendline
- Update the trendline every time there is a new peak whose second leg out makes a lower low than the upper peaks ‘s second leg low
Note: We must connect the last obvious valleys and peaks.
How do obvious ones look like?
Obvious ones are obvious as simple as that. If it’s not obvious then consider it a pause.
For more details and examples, checkout the video:
Feel free to ask if you have any queries…