When the price breaks through a strong trend line, it goes further, offering you
a great profit potential. You can draw many trend lines in one single chart, but
there are several guidelines to choose only the strongest trend lines:
1. Prefer trend lines with more than two touching points.
(Trend lines become stronger the more times they are tested).
2. The touching points should not be too close together.
3. Longer trend lines are stronger than shorter trend lines. Longer
trend lines are also seen on the upper time frames, so more traders are
aware of them.
In the example above the touching points are very close together forming an
unreliable trend line. There is no other touching point on the rest of the trend
line.
In the next example below, the two touching points are not so close together,
but the trend lines are too short. A good trend line should be at least 50
bars long. There exist much better upper and lower trend lines in this chart.
Now let's see some good trend lines!
The trend line above has 3 touching points and can be considered as much
stronger than trend lines in the previous examples. The points are evenly
distributed and the trend line is long enough. All three guidelines are met
perfectly.
Now this trend line is a monster! It is long enough with 5 touching points. You
may notice that there are two groups of two points that are too close together,
but this is not a problem as long as the other points meet the guideline. Treat
a group of close points as one “big point”.