Trendlines

Trendlines are as they sound – they’re lines drawn in correlation with the directional trend of an asset’s price over time.

Although the duration and direction of trends can vary widely, they often provide reliable guidance about where that asset’s price will be at any given point in the future, so long as its trend remains in tact. It’s from this predictability that the adage “the trend is your friend” comes.

When the asset’s price diverges from the trend’s usual range of variance, the trend can be said to have changed, and a new trend (direction) is likely to become imminently clear (although not necessarily immediately).