Trendline
Definition
A trendline is a straight line drawn connecting two or more swing highs (in a downtrend) or swing lows (in an uptrend) that defines the slope and trajectory of a price trend — price bouncing off a trendline is a potential entry signal, while breaking through it is a potential trend-change signal.
Example
“The stock had been making higher lows for six weeks, each one touching the same upward-sloping line I'd drawn from the first two swing lows. Fourth touch was my entry — trendline support held again with a bullish candle, stop below the line.”
Detailed Explanation
A valid trendline requires at minimum two points to draw and a third point to confirm — two points is just a line, three points that all touch suggest the market has a pattern. Uptrend lines connect rising swing lows: draw a line from the first significant low through subsequent higher lows that all touch or come close to the line. Downtrend lines connect declining swing highs. The more touches a trendline has, the more market participants are aware of it and acting on it, making the line more significant as both a support/resistance level and a potential breakout trigger.
The practical trading application of trendlines is as dynamic support or resistance. In an established uptrend, price pulling back to the uptrend line and bouncing is a potential long entry — the line represents the "floor" of the trend structure, and a hold confirms the trend is intact. The stop goes just below the trendline, giving you a tight, defined risk with the clear invalidation point being a break of the trend structure itself. When the trendline breaks with volume, it often signals a trend change and can be traded as a reversal or breakdown setup in the other direction.
Trendlines are subjective by nature — two traders can draw different "valid" trendlines on the same chart by connecting different swing points, leading to different signals. This is why trendlines are most useful when they're obvious and widely-recognized (touching multiple significant highs or lows over an extended period) rather than forcing lines through minor wicks or choosing specific candles to create a line you want to see. When in doubt, zoom out to a higher timeframe — a trendline that's clear and clean on the weekly or daily chart is far more meaningful than an ambiguous one drawn on a 5-minute chart.