Two points to draw, three to trust
An up-trendline connects rising swing lows; a down-trendline connects falling swing highs. You need two points to draw it, but a third touch that holds is what makes it worth trusting.
A trendline break doesn't guarantee a reversal — it signals the trend's slope has changed and deserves attention. Combine it with structure (Module 2.1) rather than trading the line alone.
Channels
Draw a parallel line off the opposite swings and you have a channel — a lane the price tends to travel in. Buying near the lower rail and trimming near the upper rail (in an uptrend) is a common, simple framework. When price escapes the channel on volume, the character of the move has changed.
Drawing one properly
A trendline is only as good as its discipline:
- Connect rising swing lows (up-trend) or falling swing highs (down-trend) — two points to draw, a third touch to trust.
- Be consistent: anchor to wicks or to closes, not a mix.
- Use a log scale for big percentage moves, or the line will mislead.
- A too-steep line breaks constantly and means little; a shallow, well-respected one is information.
When a break matters
A trendline break signals the slope has changed — not automatically a reversal. Give it weight only when it coincides with a structure break (a lower-low in an uptrend) and a shift in volume. A break that immediately reclaims the line is often a trap that runs price the other way.