Things You'll Need:
- Good charting
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Step 1
Up Trend Line
An up trend line has a positive slope and is formed by connecting two of more low points. The second low must be higher than the first for the line to have a positive slope. Up trend lines act as support and indicate that demand is increasing even as the price rises. A rising price combined with increasing demand is very bullish and shows a strong determination on the part of the buyers. As long as prices remain above the trend line, the up trend is considered solid and intact. A break below the up trend line indicates that demand has weakened and a change in trend could occur. -
Step 2
Down Trend Line
A down trend line has a negative slope and is formed by connecting two or more high points. The second high must be lower than the first for the line to have a negative slope. Down trend lines act as resistance and indicate that supply is increasing even as the price declines. A declining price combined with increasing supply is very bearish and shows the strong resolve of the sellers. As long as prices remain below the down trend line, the downtrend is considered solid and intact. A break above the down trend line indicates that net-supply is decreasing and a change of trend could occur. -
Step 3
When you draw an up trend line, you connect the lows of the bars or candlesticks on your chart.
When you draw a down trend line, you connect the highs. The first step in constructing a trend line is to choose the time frame: long term, intermediate term, or short term. A long-term time frame will be several months to several years, an intermediate period several weeks to several months, and short term will be less than a day to several weeks. The periodicity of the charts -- that is, intraday, daily, or weekly -- will usually depend on the time frame chosen for trading, but in all cases, the procedure for drawing the trend line will be the same.
