Why Do We Use Trend Lines?

Traders use trend lines in trading analysis because prices move in trends and the best tool to interpret these trend are the trend lines that are to indicate the direction of the trend either upwards or downwards.

Trend lines are also commonly used by traders because they are the most simple form of analysis that is used by many traders to determine where to open buy or sell trades.

Trend lines work by indicating the support levels of prices or the resistance levels of prices.

Gold prices move in a series of support and resistance levels and these series of support and resistance pattern then forms a general market direction either upwards or downwards.

Traders use trend lines to depict these patterns on the price charts as shown on the trading example shown & described below:

Minor Resistance/Support levels

In minor resistance and support points the price will quickly form these points in the short term & quickly move past these resistance and support points during a trend.

Upward Trend: The up-ward trend pattern of this minor resistance and support points will form a sequence of areas whose general direction is upwards.

Upward Trend Series of Support & Resistance - Why Do We Use Trendlines?

Downward Trend: The trend pattern of this minor resistance & support points will form a sequence of areas whose general direction is downwards.

Downward Trend Series of Support & Resistance - Why Do We Use Trendlines?

Traders then analyze these trend line using trend line technical analysis to determine when and where to open a buy or a sell trade depending on the direction of the trend line.