It is always said in Technical Analysis that “Trend is Friend” however identifying Trend rightly is the skilled task. Once you do that “Half of the battle is Won!”
Technical Analysis is based on one key assumption which I like most “History Repeats itself” which simply means whatever happened in the past may happen in future with a small degree of variation.
Trendline is the most common yet powerful way to spot correct trend whether intraday/positional or long term. It helps understand price action & also the probable direction. If trendlines are used correctly, they act as an excellent Trading Tool.
Trendline indicates a Direction or a range. If the price makes Lower Lows & Lower Highs, its a “Downtrend”. If the price makes Higher Highs & Higher Lows, its an “Uptrend” .
To start with drawing Trendline, its simple. Just draw a “trend line” using drawing tool of your chart & connect higher lows. Use another trendline to connect lower lows. The image below shows an example.