A trendline is used to help analyse price movements and make more informed trading decisions in volatile markets like cryptocurrency. It is a straight line drawn on a price chart to help identify and visualise the direction of the market’s trend. Trendlines can be used to detect uptrends, downtrends, and sideway trends.
Drawn by connecting a series of higher lows, an uptrend line indicates that the price is generally moving upward, and traders may use it as a support level (where the price tends to stop declining and might even bounce back up).
Downtrend lines are drawn by connecting a series of lower highs. These signal a downward price movement, and traders may consider it as a resistance level (where the price tends to stop rising and might even fall again). A sideway trend occurs when prices are stable and mostly moving within a range — with equal highs or lows.
Trendlines help traders visually identify the overall market direction and can act as levels where the price is likely to reverse or consolidate, aiding in entry and exit decisions. When the price breaks above or below a trendline, it may indicate a reversal or continuation of the trend, prompting action from traders.
