Must-Read | Using Trend Charts for Trading: Avoid These Pitfalls at All Costs

After many years of technical analysis, I have found that most traders either only look at technical indicators or only focus on candlestick patterns, but they overlook the most intuitive and practical tool——trend lines. Actually, drawing trend lines is not that complicated. Today, I will share my practical insights to help you get started quickly.

What exactly are trend lines?

Simply put, trend lines are straight lines drawn on a price chart by connecting lows or highs, used to determine whether an asset is rising, falling, or consolidating. Their magic lies in: transforming chaotic candlestick movements into clear directions.

There are three core functions:

• Identifying buy and sell points (when to enter the market)
• Recognizing support and resistance levels (where prices tend to bounce or drop)
• Detecting reversal signals (when the trend might change direction)

For example, in an uptrend, each time the price hits the trend line and bounces, that line acts as natural support—an opportunity to establish long positions. Conversely, if the trend line is broken forcefully, it signals an exit or a reversal to short positions.

How to distinguish between an ascending and a descending trend line?

Uptrend trend line: connecting progressively higher lows

Core rule: Connect at least 2 lows, with each low higher than the previous one.

In practice, you need to find the “valleys” in the price. If you notice the bottoms are continuously rising with a regular rhythm, you can draw an upward-sloping line through these lows.

Taking GBPUSD on the 4-hour chart as an example, from March 1 to March 27, 2018, GBP/USD showed a clear upward trend. First, on March 1, it surged during the European session; then on March 9, it made a new high. During this period, two progressively higher lows formed—perfect timing to draw an uptrend line. Later, on March 16, after a pullback touched the trend line and bounced, it confirmed the support role of this line.

Practical tip: As long as the price stays above the trend line, the uptrend remains healthy. Once it breaks below, it indicates weakening buying momentum and a potential trend reversal.

Downtrend trend line: connecting progressively lower highs

The rules are the opposite: Connect at least 2 highs, with each high lower than the previous one.

You look for the “peaks” in the price. If the peaks are getting lower with a rhythmic decline, you can draw a downward-sloping line through these highs.

Looking at GBPUSD, from January 25 to February 27, 2018, GBP/USD experienced a typical downtrend. Starting from the US session on January 25, it declined, and on February 2, it made a lower high—forming a clear downtrend line. Later, on February 16 and 26, each time the price touched this line, it was met with resistance and continued downward.

Practical tip: As long as the price stays below the trend line, the downtrend remains intact. Breaking above it suggests the bears are losing strength and a new uptrend might begin.

The most critical reversal signals on trend charts

How does a bear turn into a bull?

On the GBPUSD downtrend chart, a very obvious reversal point is on March 13, when the price strongly broke above the downtrend line. This break changed the entire pattern.

The key is that during the pullback on March 16, the previous downtrend line turned into support, and the bullish trend officially started. This is what I often say—Break + Reversal confirmation = Trend reversal confirmation.

How does a bull turn into a bear?

On the same GBPUSD chart, by September, the situation reversed. The previous upward trend was well-defined, with pullbacks to the trend line bouncing repeatedly. But on September 21, the price closed with a large bearish candle breaking downward—a clear reversal signal.

On September 26, when the price retested the original trend line and it turned into resistance, the bearish trend was confirmed. This indicates the bullish support has been exhausted.

Practical tip: Trend lines are your trading map

In an uptrend, trend lines are buy points

Take EURUSD on the 4-hour chart, starting from February 25, 2020, the price began rising, with lows gradually rising, forming a beautiful uptrend line.

• February 28 during the Asian session, pullback touched the trend line → supported and bounced (buy point)
• March 4 during the US session, touched again → confirmed buy point
• March 5, a surge of bulls entered, and the rally continued upward

Trading suggestion: In a clear uptrend, whenever the price hits the trend line, consider buying. This line acts as a natural risk control point—if broken, stop loss.

In a downtrend, trend lines are sell points

Similarly, EURUSD from March to April 2020 showed a downtrend. Bears gained momentum on March 11 and 12, forming a clear downtrend line.

• March 13, bounce to the trend line → resistance, consider selling
• March 16 and 17, again touching the trend line → confirmed resistance, continue shorting

Trading suggestion: In a clear downtrend, when the price bounces to the trend line, you can short. This line is your sell signal—only break above it signals a stop loss.

Trend channels: advanced technique

If a single trend line is a “boundary,” then a trend channel is like a “corridor”—two parallel trend lines forming a trading range.

How to use an ascending channel?

An ascending channel consists of a resistance line and a support line, with prices bouncing within this channel to make higher highs.

Trading logic:

• Price touches the upper boundary (resistance line) → consider shorting
• Price falls back to the lower boundary (support line) → consider buying
• Price breaks above the upper boundary → acceleration of upward movement, consider chasing longs
• Price breaks below the lower boundary → trend reversal signal, consider exiting

If the price stays away from the upper boundary for a long time, it indicates weakening momentum in the uptrend—also a sign to watch for potential reversal.

How about a descending channel?

The upper boundary acts as resistance, the lower as support. Logic is the opposite:

• Price touches the upper boundary (resistance) → consider shorting
• Price rebounds to the lower boundary (support) → consider buying
• Price breaks below the lower boundary → acceleration of decline, continue shorting
• Price breaks above the upper boundary → trend reversal, consider exiting

Which software to use for drawing trend charts?

TradingView——the most professional choice

TradingView is the most popular online candlestick chart platform worldwide, used by almost all mainstream exchanges and financial websites for technical analysis. Its advantages are obvious:

• Most comprehensive drawing tools, including trend lines, channels, angles
• Supports annotations and alerts
• Free version is sufficient; paid versions offer more features
• Real-time data updates, wide range of assets

All my clear charts are from TradingView because of its high drawing precision.

MetaTrader 4/5——Trade while drawing

MetaTrader 4 and MetaTrader 5 are professional trading platforms developed by MetaQuotes. Their features include:

• Integrated trading and analysis, no need to switch windows
• Extensive technical indicators, strong customization
• Support unlimited charts and scripting
• Cover forex, CFDs, stocks, futures, and more

If you want to analyze and trade simultaneously, the MetaTrader series is a good choice.

Final reminder

Trend lines may seem simple, but to use them well requires real trading validation. The key is to find those lines that have been repeatedly tested and truly act as support/resistance—not just connecting any two points randomly.

My advice: first choose a software (I recommend TradingView), pick a few familiar trading pairs, and practice on historical data. Observe which lines get broken, which are repeatedly validated, and which reversal signals appear. Over time, you’ll understand the temperament of trend lines.

Lastly, remember—trend lines are your trading map—they tell you where to buy, where to sell, and when to run. Mastering their use makes your technical analysis half successful.