What is trend ?
When we firs look at a chart, for example of EUR/USD, we need to find in which stage the chart is currently. There are 3 options:
Strategies and trades generally work the best if you BUY in the uptrend and SELL in the downtrend. This way, there is the highest probability to success with the trade.
Sideways stage is usually traded within the upper resistance and lower support or is not traded at all.
We advice to trade with the trend.
How to know the trend ?
The chart is doing higher lows and higher highs
The chart is doing lower highs and lower lows.
Highs and lows are trading sideways, in a line, neither up and down.
Trendline is a line, that shows the trend of the chart. So if we see, that the price is going upwards and making higher lows, we can connect them with a line and approximately see where the price is going.
If we see that the price is making lower highs, we can connect them with a line and see the downtrend and approximate development of the price.
Break of the trendline
When the trendline is broken with a strong reversal sign, in most cases we can see the trend reversal. Many traders use break of the trendline as entry point for their trades.