Definition
A trendline is a straight line drawn on a price chart to capture the slope and direction of a trend. An uptrend line connects two or more successively higher lows; a downtrend line connects two or more successively lower highs. Once drawn, the line projects forward to anticipate where price may react.
Trendlines are among the simplest and oldest tools in technical analysis. They reduce a complex price series to a single reference line that describes how steeply and consistently a market is moving.
Why it matters
How it works
To draw a valid trendline, an analyst connects at least two significant lows for an uptrend or two highs for a downtrend; a third touch confirms the line. The more times price touches the line without breaking it, the more significant the level becomes.
While the trend holds, price tends to bounce off the trendline, making it a place to enter or add to positions. A decisive close through the line, especially on rising volume, suggests the trend may be slowing or reversing. A trendline that is too steep is fragile and unlikely to hold for long.