InvestorQ : What is meant by an uptrend line and a downtrend line?
Jignesh Gupta made post

What is meant by an uptrend line and a downtrend line?

Answer
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Maniish Lofar answered.
1 year ago


Firstly, let us look at what is an Uptrend line. An uptrend line is a straight line drawn upward to the right that connects two or more low points. The second low must be higher than the first for the line to have an upward incline. Uptrend lines act as support and indicate that there is more demand than supply, even as the price rises. As long as prices remain above the trend line, the uptrend is considered to be intact. A break below the uptrend line indicates that a change in trend may be occurring. In fact, as depicted above, the trend lines are very useful in identifying whether the trend is intact or whether the trend is showing signs of breaking down, in which case a new trend is said to be starting. You need to change your trading tack accordingly.

Secondly, let us look at a Downtrend line. A downtrend line is a straight line drawn downward to the right that connects two or more high points. The second high must be lower than the first for the line to have a downward incline. These downtrend lines typically represent the lower tops and the lower bottoms combination. Downtrend lines act as resistance and indicate that there is more supply than demand, even as the price falls. As long as prices remain below the trend line, the downtrend is considered to be intact. A break above the downtrend line indicates that a change in trend may be occurring. In that case you need to change your trading according based on your trend. It is normally the combination of the uptrend line and the downtrend line that is useful for chartists because it tells you two things. Firstly, it tells you the broad range in which the stock price or the index value will operate. Secondly, it tells you if the trend is intact or not so that the trader can change the trading tack accordingly.