Trend lines are powerful tools to keep an eye on the advancement of the market.
They are diagonals support and resistance areas.
Trend-lines are at first used to confirm the existence of a newly formed trend. They let you know clearly that a leg-down or leg-up just born and has high odd to continue developing according to your line.
More than confirming the market’s tendency, trend-lines are used to follow the trend. A breached line will warn you that the trend is in a bad shape, could reverse, or that the market could start a consolidation.
To make one, simply draw join two points of reversal together. Let the line continue in time: it is likely to get tested again.
If the line get touched more than three times without being breached, it is considered a trustworthy one.
The line must have a notable angle and must not be flat or almost flat, or that would simply be an horizontal S&R level, with no trend indication.
Of course they works on all timeframes.
Here I took one applied over a 6-months period: being long-term minded is good. When this support trend line broke, it further confirmed the end of Bitcoin's bull market.
Here is another long-term example. This trendline has been in service for more than a year!
Imagine you had used it as a simple exit-strategy everytime the price touched it: it would only miss you an entry-strategy for each leg-down that followed the contact with the resistance, and you'd have gained as much money in a year than your old job would have paid in your whole life!
You can also use it in bear markets:
The breakout of the first trend line shows you the way to an outrageous +1600% profit.
The breakout of the second trend line shows you the way to an enormous +200% profit.
If you play it perfectly (but nobody is perfect), you could go from $1000 to $32000 in less than 9 months. There is room for imperfection...
You can also use support trend lines in bear markets, although it's unrecommended to buy in a declining environment:
A channel is simply the association of two trend-lines: one used as a support, the other as a resistance.
Channels provide a greatly useful way to follow the trend, and give visual help about its state: is the growth's speed healthy? Is the market going bearish, or are we still into our range?
Note that channels don’t have to be exactly parallels. However, if their parallelism is completely off, exploring the construction as a chart pattern is a good idea.