Trendlines and channels
A trendline is a sloping line drawn by joining the lows in an uptrend or the highs in a downtrend. Together with a parallel line through the opposite highs or lows, it forms a channel. It makes the trend's slope and pace visible, but drawing it is open to interpretation.
What is a trendline?
In an uptrend each low is above the previous one. The line joining these lows slopes upwards, and price staying above it shows the trend continuing at the same pace. In a downtrend the line runs through the highs and slopes downwards.
A trendline adds no new information; it makes visible the direction that the sequence of highs and lows already describes. The highs and lows themselves remain the main reference.
How to draw one
- Identify the trend's direction. Use the lows in an uptrend and the highs in a downtrend. First make sure the sequence of highs and lows really shows a trend.
- Join at least two clear points. Two lows (or highs) are enough to draw a line. Take the points where price clearly changed direction, not small wiggles.
- Wait for a third touch. Any two points give a line, so at this stage the line is only an assumption. If price comes back to it a third time and reacts, the line becomes more meaningful.
- Extend the line forward. The extended line gives a rough reference for how far the next pullback might reach.
What is a channel?
If a second line, parallel to the trendline, is drawn through the opposite highs (or lows), a channel forms. For a while price moves between these two lines within a certain width.
A channel shows both the trend's direction and the width of its swings. Price failing to reach the upper line, or moving outside the channel, can be a hint that the trend's pace is changing. A horizontal channel is a range.
Why drawing it is subjective
- Wicks or bodies? The line can run through the wick ends or through the bodies. The two choices give different slopes and different break points.
- Which points? Picking different pairs of lows on the same chart gives different lines. Not everyone will see the same line.
- Timeframe. A line on the 1H chart may not show on the daily chart; longer-term lines rest on fewer but clearer points.
- Scale. In markets with large moves, such as crypto, lines drawn on a linear and a logarithmic chart drift apart over time.
Reading the line as a rough guide rather than an exact boundary takes this uncertainty into account.
Is a trendline break a change of structure?
When a close comes below a rising trendline, two different pictures can follow.
Only the line broke
Price drops below the line but stays above the last important low. The trend's pace may have slowed; the structure still holds.
The structure broke too
Price stays below the line and then closes below the last important low. This can show that the rising structure has broken.
What it shows, what it does not prove
What it shows
- The trend's slope and the pace at which it is moving
- The line around which pullbacks have stopped so far
- The width of price swings, when there is a channel
What it does not prove
- That price will react to the line on the next touch too
- That a break of the line means the trend is over
- That the line is the only correct drawing; other points give other lines
The MarketLevelMap view
How it relates to zones
A trendline slopes, while support and resistance zones are horizontal. When the two meet, for example when a rising trendline passes through a support zone, that area can draw more attention as a place where two different readings overlap.
A break of the line alone says little. Whether the structure has broken is read from whether the zone of the last important low holds. Thinking of the line, like a zone, as an approximate path with some width smooths out the differences that come from choosing wicks or bodies.
Often confused with
For general information only. Not investment advice.Last updated: