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What’s the slope of a trendline?
Wondering what the slope of a trendline is? You’ve come to the right place! Let’s get started, shall we?
Remember how in our previous article, we mentioned how trendlines are used to give the trader a better sense of which direction the market is moving?
Well, we need to clarify, however, that the fact that we drew a trendline does not mean that prices will indeed reach 100% or follow it.
In simple words, the slope of the trend may change any time no matter what and hence the trendline needs to be adjusted to reflect the new rate of ascend or descend. For instance, the trendline may become steeper or slower!
In the following example, the trendline labeled as 1 has been proven to be slow as prices accelerated and formed a new steeper trendline.
As a result, we need to adjust the trendline!
The new trendline labeled with the number 2 is steeper but is it sustainable?
Let’s take a look at another example.
Here, the original trendline has eventually turned out to be too steep and instead the slower prices formed a slower trendline.
As you can see, the new trendline labeled with the number 2 is drawn to reflect the new slope of the trend.
When a steep trendline is broken, usually a correction will be in place and a new trend will follow at a less steep angle and we may add more sustainability.
Of course, now a new question arises.
What is the best slope?
Well, according to W. D. Gann, the 45o degree angle is ideal for a sustainable trend but this is another topic in its own right!
Next, we’ll be looking at how we can determine a valid penetration of a trendline!
