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December 10, 2011

Drawing Trend Lines 101

by HigherAlpha

Trend-lines are what I use to trade. In fact, I think this should be the main tool besides major support/resistance levels when doing swing trading. Trend-slopes can change, and be ready for it!

Tops can be calculated by using two recent lows and duplicating this slope and moving it to match a recent top.

An uptrend is dictated by a consecutive combination of higher highs and higher a lows. A downtrend is defined by a consecutive combination of lower low and lower highs.

This tool can be incredibly accurate (to the 0.1% in accuracy to pick a top). The key to trend lines is that the slope of the top and bottom trend lines should be IDENTICAL. Any significant differences are likely an indication of a trend change and should be re-evaluated.

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