Trendline Trading

A trendline connects two or more swing lows in an uptrend, or two or more swing highs in a downtrend. It is one of the simplest tools in technical analysis, yet drawing it consistently takes practice. This sample strategy trades the third touch of a valid trendline and has clear rules for when the line breaks.

Why this setup

A trendline makes the pace of a trend visible. When price returns to a line that has held twice, many traders watch for a reaction there. The third touch is a common entry point because the line is confirmed but not yet overused. The more touches a line collects, the more people see it, but also the more likely it is to break eventually.

Entry rules

1. Draw the line through two clear swing lows, and always draw it the same way, using either wicks or candle bodies.
2. The line should not be too steep; very steep lines break quickly.
3. Wait for price to come back to the line a third time.
4. Look for a bullish reaction candle at the line, ideally where a horizontal support is also close.
5. Enter on a break of that candle's high.

Exit and stop

• Place the stop below the line and below the reaction candle's low, with a small buffer.
• Target the most recent swing high, or the upper channel line if a parallel line can be drawn.
• If price closes clearly below the line, exit, and do not redraw the line to fit the price.
• After a break, watch for a retest from below; that is a different setup with its own rules.

Risk notes

Trendlines are subjective, and two traders may draw two different lines. Write down your drawing rules and stick to them. On long-term charts, log versus linear scale changes where the line falls; pick one and keep it.

Important: This is a sample educational strategy, not a buy or sell recommendation. Test every rule first, with a backtest on historical data and then on a demo account, and decide whether to use or adapt it only after you understand how it behaves in different market conditions.