What is the difference between Trend and TrendLine?
In the previous episodes, we discussed about various rules on identifying the trend. Now it is time to add one more rule to it.
A TRENDLINE CONNECTING TWO VALLEYS OR PEAKS DOES NOT NECESSARILY MEAN THERE IS A TREND
We use trendlines to connect last two obvious impulses (valleys and peaks) and detect potential imbalances if these trendlines are solidly broken with full OHCL candles.
Many traders struggle with this way of drawing trendlines and how trendlines can tell us about the trend in a specific timeframe. But they forget the fact that a bullish or bearish trendline is connecting the last two impulses does not necessarily mean there is a trend.
As supply and demand traders, we must take into consideration opposing imbalances and ask ourselves what is happening with those imbalances.
Are the opposing imbalances being eliminated or being respected? If the answer is respected then drawing a bullish trendline will not result in an uptrend, the TL will be used to detect potential supply zones if it’s solidly broken
So, remember, a trendline connecting the last two valleys or peaks does not necessarily mean there is a trend, we also need opposing zones to be eliminated as well.
BULLISH TRENDLINE IS NOT A CONFIRMATION OF UPTREND
A bullish trendline connecting last two valleys does not necessarily mean there is an uptrend. An uptrend requires at least one opposing supply to be eliminated, in this case supply zone is marked in RED. Once this supply is taken out, will have an official uptrend.
So, being able to draw a bullish trendline connecting 2 valleys does not necessarily mean there is an uptrend. Trendlines as a standalone item, can be used as confluences to locate new imbalances when broken but not to assess current trend.
In addition to trendline, an uptrend also needs an opposing supply zone/imbalance eliminated.
For more details and examples, checkout:
