As a general rule of thumb, the existence of a trend depends on a series of highs and lows. 2 consecutive highs, each above the previous relative high and 2 relative lows above the previous low would constitute a tentative uptrend. A 3rd relative high would confirm that trend.
It is very important to keep in mind that markets do not always move in trends! They also spend a lot of time in ‘ranges’ fluctuating between already established highs and lows.
A range bound market is often referred to as a ‘sideways’ market since it is neither moving in an upward trend or a downward trend.
The price during a sideways market is often simply building support for a continued move in the original direction.
Drawing Trend Lines
Trend lines are taut on historical price levels that blow in the general direction of where the market is nomen and also provides indications of aid or resistance. Drawing trend goods is a highly transcendental matter, due to the fact that there are so many variables.
How it works is this… In an uptrend a trend line should connect the relative low points on the chart. The line connecting the lows in a longer term view commit be a support line that can provide a tile for partial retracements. The downtrend line that connects the relative highs on the chart will similarly perform as resistance to shorter moves transmit higher.
It is central to be flexible when drawing trend wares besides redraw trend lines whenever necessary.
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