Figure 2 Angles trendlines, especially parallel channels are common sightings.

Trading the trendlines can be difficult because they are counter-trend indicators. They act as support when the market is going down and resistance when prices are going up. Using them to tactically trade can be an art more than science. Understanding market action will help clear up the shady area of the market’s next move when resistance or support will hold. The useful advice is to learn to be patient and wait for the bounce, pullback or test (three different words with three different context with practically the same meaning, depending on what book you read or the person with who you speak) the trendlines.

So how does one mark the different between a random trendline that may likely be a non-existent trendline to a possibly legitimate one? Using the parallel channel; that is, if the angle drawn from above or below from recent action, that can be used as a useful criteria that the second trendline might be a legitimate. Figure 2 shows the upper channel was made by drawing the two pivot highs. Once that’s completed, the second trendline is drawn based almost on the same angle as the first.

In case of the horizontal line, simply review the charts from days to months earlier to locate where the previous reversal area where the horizontal lines played a crucial role and may influence again. Chances are if the horizontal trendlines have been traced in the past that caused the market to reverse they will be effective again when new prices go near them again.

Technically, angled trendlines require more years of experience and thorough knowledge of the market to truly appreciate its profitable. Fortunately, horizontal lines don’t require as much artistic insight to figure out where the price congestions are located by quickly perusing the charts. Furthermore, horizontal trendlines appear more often and are more reliable since many veterans and floor traders use these simple techniques to pull profits from the market everyday.