Trend lines highlight pivot points-where market activity moves out of a pattern and into another one-and indicate a projected development path for the instrument you're tracking. Monitoring is an easily readable way to help inform your trading, whether you concentrate on day trading or work in larger time scales.

Using trend lines can help you filter out the "noisy" detail of traditional candlestick charts and see the big movements where real money can be made. These movements originate in consolidation zones, where an inclining and declining trend intersect. Using these line charts to locate these consolidation zones can help you identify key entry and exit points. The beauty of trend lines is that you get a clear visual of trends as they develop, and the triangular formation of a developing consolidation point is easy to spot and track.

What's the Importance of Pivot Points?

Pivot points are the key to understanding trend lines. Where an instrument pivots, it's pointing you to something happening in the market that you should pay attention to-an up trend is turning to a downtrend, or vice versa. Watch pivot points and analyze them carefully to locate the underlying cause. Is what you're seeing part of a cyclical pattern moving through its top or bottom? Or are you looking at something that could be the beginning of a larger-scale movement? Track the preceding activity to evaluate your next move.

How Do I Predict Which Way My Stocks Will Break Out?

It helps to investigate trends at a higher time scale; an asset will often break out of consolidation in the direction of a larger trend pattern. This isn't a sure thing, however; it is essential to monitor other indicators in order to provide context for trending behavior. Using trend lines at a variety of time scales, however, will give you a detailed picture of trading activity and allow you to locate high-probability trades effectively.

Given this caveat, the trend line is a powerful and easy-to-use indicator that will serve you in good stead throughout every time scale and instrument you can throw at it. As you learn and use it through time, you will begin to understand more subtle interactions that will increase the power of your trading immeasurably.

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