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Trend Lines - Trend Strength

By , About.com Guide

Trend Line Chart

Strong Trend

In addition to the direction of the current price movement, trend lines also show the strength of the current price movement. The strength of the price movement (or trend) is not as important as the direction, but it is useful in determining if the trend is likely to continue or not. The strength is shown by the angle of the trend line, with a steeper angle representing a stronger trend, and therefore a higher probability of the price continuing in the same direction.

Strong Trend

When the angle of the trend line is steep (perhaps greater than 30 degrees), the strength of the current price movement is high, and the price should continue in the same direction for the immediate future (perhaps bouncing off of the trend line a couple of times). A strong upward trend is shown in yellow in the example chart (view the chart in full size).

Weak Trend

When the angle of the trend line is shallow (perhaps less than 30 degrees), the strength of the current price movement is low, and the price may not continue in the same direction for very long (perhaps reversing through the trend line). A weak downward trend is shown in yellow in the example chart (view the chart in full size).

Trend Strength Not Trend Line Strength

Note that the angle of the trend line shows the strength of the trend (the price movement), not the strength of the trend line. A shallow trend line that shows a weak trend, may still be a strong trend line, and could cause the price to move sideways rather than reverse its direction completely.

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