subject: Short Term, Medium Term And Long Term Trendlines [print this page] Short Term, Medium Term And Long Term Trendlines
As a trader, one of the most basic concepts that you must master is that of trendlines. Markets a lot of times are trending meaning price action is making higher highs and lower lows. When the prices make higher highs, it means an uptrend. And when the prices make lower lows, it means a downtrend in the market.An uptrend line or support is drawn by connecting the higher lows with a straight line and extending that into the future. Similarly, a downtrend line or resistance is drawn by connecting the lower highs with a straight line and extending that into the future.What you need to understand is that trendlines are very important for a trader. They visually depict the support and resistance in the market. Trendlines need to be updated with time as the market keeps on changing it's direction.Now, what you need to understand is that there are long term trendlines, intermediate term trendlines or medium term trendline and short term trendlines. You will need to constantly update these three trendlines.As the angle between the trendline and the price action increases, the likelihood of the market making a correction increases.When the market makes a correction, it starts a counter trend rally that takes it back towards the main trendline.These counter trend moves are represented by the short term trendlines.A trendline can tell you when a trending market will revert to a counter trending correction. As each new trendline become steeper, it is time for the market to make a correction. It is unnecessary for you to know when that correction will happen. When you see the new trendline getting steeper, exit a portion of your position being mindful of the fact that prices have a tendency to migrate back to its longer term trendlines.
