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A trend line connects a series of swing highs (in a downtrend) or swing lows (in an uptrend) to visualize the general direction of price. A valid trend line needs at least two touch points to draw and a third to confirm it's holding.
A channel is formed by drawing a second, parallel line on the opposite side of price — giving you both a trend direction and a rough "ceiling and floor" the price has been moving between.
Trend lines aren't predictive on their own; they describe what has already happened. Their main practical use is spotting when price behavior changes — a clean break of a well-respected trend line is often treated as an early signal that the prior trend may be weakening.
Real-World Example
A trader draws a trend line connecting three rising swing lows on a stock chart, then draws a parallel line through the swing highs above it, forming a rising channel. Each time price touches the lower trend line, it bounces, and each time it approaches the upper line, it stalls, the trader uses the lower line as a recurring low-risk buy zone within the established channel, until price finally breaks below the lower trend line, signaling the channel, and the trend it represented, may be ending.
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