Mastering trendlines and market trends: A practical guide

This article is brought to you by TradingView 

Trendlines and trend identification form the foundation of technical analysis. Whether you're a beginner learning the ropes or an experienced trader refining your strategy, understanding how to draw and interpret trendlines can significantly enhance your decision-making.   

This guide explains how to draw trendlines using TradingView, identify market trends, and what those trends say about market direction. 

What is a trendline and why is it important? 

A trendline is a straight line drawn on a chart connecting two or more significant price points — typically notable highs and lows.  

It shows the general direction of price movement and helps traders to determine their trading outlook, identify potential entry or exit points, assess trend strength, and recognise possible reversals or breakouts. 

Trendlines act as dynamic support and resistance levels, and are more reliable when confirmed by multiple touches, without price breaking through them. 

Trendlines are among the essential tools in an investor's toolkit. They can provide actionable price insights, simplifying what can be very complex price movements. For investors, trendlines can help identify price direction and highlight common market behaviour. People often react to familiar levels, buying where prices have risen before or selling where they’ve fallen, making trendlines critical for both experienced traders and beginners.  

This repeated behaviour can reinforce trends and create key decision points on the chart. Recognising these patterns can help investors align with momentum, avoid mistimed entries, and manage risk more effectively. That repeated behaviour makes trendlines a visual guide to market psychology. 

How to draw trendlines on TradingView 

Opening the chart of any preferred asset initiates the process of drawing a trendline using TradingView's powerful charting tools.  

Start by opening the chart of your preferred asset in TradingView. This could be anything from major cryptos like BTCUSD to tech stocks such as Apple, Tesla or Amazon — your choice depends on your trading focus. 

1. Select the trend line tool  

Find it in the left-hand toolbar, represented by a diagonal line icon. Shortcut: 

• Windows: Alt + T 

• Mac: Option + T 

2. Identify key price points  

For an uptrend, use swing lows; for a downtrend, use swing highs. Precision is key — the more accurately the line touches critical points without cutting through candlesticks, the more reliable it becomes. 

3. Extend the trendline 

Drag the line forward to project possible future price behaviour. 

4. Customise for clarity 

Right-click the line to adjust color, thickness, or placement. A well-drawn trendline acts like a signpost, guiding your interpretation of the market. 

What trends reveal about market direction 

Understanding trends is more than theoretical—it’s a practical tool for aligning strategies with market momentum. Each trend reflects market psychology and movement dynamics:  

• Uptrend: Higher highs and higher lows → Bullish sentiment 
  Buyers are in control. Some investors may buy on pullbacks near the ascending trendline. 

• Downtrend: Lower highs and lower lows → Bearish sentiment 
  Sellers dominate. Some investors may look for opportunities to short. 

• Range-bound: Horizontal support and resistance → Indecision or accumulation 
  Price oscillates within a range. In range-bound markets, prices often bounce between support (the floor) and resistance (the ceiling). Market participants may look to buy when prices are near support, sell when they approach resistance, or wait for a breakout before taking a clearer directional view. 

Trend types at a glance 

Applying them thoughtfully rather than mechanically is crucial to make the most of trendlines. Here are some pro tips for effective trendline use: 

• Use multiple timeframes: Trendlines on higher timeframes (daily, weekly) carry more weight than those on 5-minute charts. 

• The more touches, the stronger trendline: Three or more confirmations increase reliability. 

• Don’t force it: If the price doesn't respect the line, it's likely invalid. 

• Combine with indicators: Confirm with RSI, MACD, or volume to validate breakouts or trend strength. 

How to interpret trendline breaks: 

A trendline is often viewed as a signal clarifier, while a trendline break is considered an even stronger signal. However, not every break signals a reversal. Sometimes, price pierces a trendline only to resume the original direction (continuation pattern). 

Signs of a genuine trend reversal: 

• A break occurs with additional confirmation, e.g., failure to make a higher high in an uptrend or formation of a lower low after a break.  

• Strong follow-through supported by volume and price structure changes. 

Signs of a false breakout: 

• Break lacks momentum or follow-through. 

• Price quickly returns to its previous trend, trapping premature traders. 

Conclusion

A trendline break should be treated as a warning light, not a standalone signal. Reevaluate trend strength, adjust risk management, and seek confirmation before committing to a countertrend move. 

Trendlines are not forecasts — they are outlines. When applied with patience and context, they become a trader's compass in an often chaotic market. An authentic trend change does not appear overnight; it builds, forms structure, and gains confirmation before becoming obvious. 

Trade smarter with TradingView on CMC Invest

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On desktop

1. Search for any instrument in the top bar

2. Select the advanced chart icon to open a full screen TradingView experience

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1. Search for your instrument

2. This opens the product overview, where the TradingView chart appears by default

3. Tap the two circle icons to switch chart style or enter full screen mode for analysis on the go

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Disclaimer: The research content has been prepared by third party provider, TradingView ©. CMC Invest shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on, or otherwise as the result of the correctness, completeness, accuracy, currency, or timeliness of the research or from any reliance on the research provided.