A line is drawn on the chart to represent the market trend. This line is called a trendline. Trendlines help a trader to identify any future reversals in trends. The low points of an upward trend are connected to form a line. The support received during a movement of price from high to low is indicated in this line. Traders can get a hint from this trend line and anticipate when the prices will move upwards again.
On the other hand, a trendline that joins the high points of a downtrend represents the resistance level. This level shows the resistance faced during the movement of price from low to high. Channels are two parallel trend lines that show both trend and resistance.
When traders are conducting technical analysis, it is very important to understand and recognise the trends. The trends act as friends of traders and provide them a correct trading path.
Below are pictures that represent both and uptrend and a downward trend.
If you notice towards the far right on the chart, the uptrend is being broken. And, on the chart below, the downtrend is now being broken. Now, the real question that you should be asking your self when this happens is “is the start of a new trend in the opposite direction?.” Unfortunately, when it comes to the markets you can never truly be 100% percent sure.
The best thing you can do is plan your trade and follow the rules and parameters that you system dictates. Sometimes, it will be very well the start of a new trend. Other times not so much.
The are just one of the many tools you should consider using for more accurate and profitable trading.