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Definition: Trendline

A trendline is the measure to gauge the reaction of the investor to changes in the level of stock in the share market. It is an important tool used by people before investing in stocks. A dip in the trend line shows that the stock has reached its lowest level and hence, it is at that level the investors can consider buying of the stocks.

Now when this happens the stock price increases because of increase in the demand of that stock until a point where it reaches a high i.e. its maximum value or spikes. Now, at this point the investors consider selling their stocks and thus, the prices of the stock decreases. It can be considered as a macro phenomenon.

A trendline is formed considering the dips and the spikes in the stock prices. The support and resistance levels can be identified by using the trendline. The support levels is usually the level at which the stock price starts to grow. Similarly, the resistance level is the level at which the stock prices usually fall. With the help of support and resistance levels, an investor can identify the future levels of the stock and consider buying or selling of the stocks. The trendline analysis is not only restricted to the prices of stocks. It can be extended to price of commodities, oil and gas, raw materials etc. which can help a person determine an optimum strategy for his/her business.


Hence, this concludes the definition of Trendline along with its overview.

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