Trendlines

Trendlines are a key part of delving into technical analysis and trading off of charts. When used correctly, they're a helpful, clear, and relatively simple tool for traders. Used improperly, however, trendlines become ineffective and even counterproductive. Knowing how to use trendlines can be the difference between winning and losing trades.
Keep reading to learn some tips that can help you effectively use trendlines as part of your trading strategy.

The Basics of Trendlines

Trendlines are simply diagonal lines that highlight a trend or price range. These lines follow the price movement in an attempt to give traders a general sense of how high or low the price might go in a given timeframe. When the price rises, the trendline rises accordingly. When the price falls, the trendline falls.
When prices are rising, connecting the lows with a line results in an ascending trendline—an "uptrend." A trendline can also be drawn along the highs of the trend. This shows the angle of ascent, the strength of the price move, and the relative strength of the trend.
When the price falls, the highs fall. Connecting these falling highs results in a descending trendline—a "downtrend." A trendline can also be drawn along the lows to highlight the angle of descent​ and the strength of the downward price movement.

Using Multiple Trendlines

Typically, you would have more than just one trendline in play. At any given moment you could draw many trendlines, all showing the price movement over various periods of time. 
Trendlines at steep angles typically have short lives, since prices cannot sustain a near-vertical rise or fall for long. Shallower trendlines are more stable and easier to maintain.
Drawing trendlines whenever possible and on multiple time frames can aid new traders in spotting the overall trend, small trends, and corrections within those small trends.
During an uptrend, opportunities to buy or go long may occur when a short-term downtrend meets the overall ascending trendline. During a downtrend, selling or shorting opportunities may occur when a short-term uptrend meets the overall descending trendline.

Adjusting Trendlines

Once drawn, trendlines often need to be adjusted. Prices rarely move uniformly for a prolonged period. This means any acceleration or deceleration of the trend requires adjustments to the trendline.
To figure out whether your trendline needs adjusting, watch for any instances when the price breaks through your lines. If the price moves below your trendline in an uptrend, then you need to adjust your line. The same goes for downtrends when the price moves above the trendline.
Keep in mind that adjusting a trendline doesn't mean the trend has changed. An uptrend is characterized by higher highs and higher lows, and as long as those keep happening, it's still an uptrend. You may find that you adjust your trendlines several times within a single uptrend.

Trendlines As a Guide

The need for constant adjusting makes a trendline imprecise for use as a trade signal. Consider that a trendline drawn at a slightly different angle can make a big difference in what price that trendline intersects with over time.
While you can use trendlines as a guide, you must use more precise criteria for determining when to enter or exit a trade. These criteria could include a certain size move back in the trending direction, a trigger based on an engulfing pattern (where the next bar is larger than the previous one, engulfing it), or another type of indicator that adjusts more precisely and quickly to changes in volatility.
If you use trendlines as just a guide, then you don't need to worry about drawing trendlines along the exact highs or lows. Draw "trendlines of best fit"—the ones that provide visual clues about potential trade areas.
Since the trendline isn't being used as a specific trade signal, rough trendlines can provide you with relevant information about the trend without forcing you to readjust it constantly.