Technical analysis

Trendline

A straight line through selected swings or other price points, used as a time-varying reference. Point selection, axis scale and crossing rules must be explicit. Touch count or shallow slope proves no greater effectiveness. A line break alone determines neither future direction nor swing-structure status.
Example. On a linear scale, swing lows at bar indices zero and four are 1.1000 and 1.1040. The line rises 0.0010 per bar, placing it at 1.1060 at index six. Crossing that line does not automatically break the earlier low of 1.1040.

Point selection

Specify swing rules, wicks or bodies, two initial anchors and permitted redrawing. Two points determine a straight line; a third touch can satisfy a filter but does not prove validity. Linear and logarithmic scales can produce different lines, while the visible screen angle also depends on chart proportions rather than an intrinsic market property.

The threshold changes with time

A sloping line has a different price at each index. Calculate its threshold at decision time instead of comparing with a fixed earlier number. Confirmed swings appear after required later bars. A perfectly drawn historical line may therefore have been unavailable in that form when the apparent opportunity occurred.

Break versus structure

Crossing a line, breaking a swing and crossing an average are different rules. A line break can support hypotheses of reversal, slowing or noise; it does not determine the cause. Touch count and slope are features to evaluate, not universal guarantees of effectiveness. Keep the specified close-based or intrabar crossing criterion consistent.

FAQ

Does a third touch prove a valid line?
No. It can meet a conventional filter requiring evaluation.
Does breaking a trendline always end the trend?
No. A line and swing structure are different direction definitions.

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Jarosław Wasiński

Editor-in-chief, ForexMechanics.com • Macro & FX analyst

Independent analyst and practitioner with over 20 years of experience in financial markets. Actively involved in Forex since 2007, with a focus on fundamental analysis, OTC market structure, and disciplined capital risk management.

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