What Are Traditional Trendlines And What Do They Represent?

*Bob Iaccino, Chief Market Strategist and Co-Founder of Path Trading Partners, joins us live every Thursday from 11am ET, as our risk management educator. With 30 years' experience working as an active investor in equities, commodities, futures and FX there are few better to talk on the subject of risk management.

Bob has developed a method for breaking down his key fundamentals of risk management, in a way that he thinks retail traders can understand and use to get actionable insights to bring into their own trading. Below are some excerpts of Bob’s thoughts from a recent live session. If you’d like to save your seat to watch and participate in the next session, register here.

Trendlines are a visual representation of support and resistance in any time frame.

Pivot highs and pivot lows are key turning points in the market, equivalent to swing highs and swing lows. They are usually called swings but can also be called pivots. This essentially defines a trendline and the structure that supports it.

Trendlines naturally show a trend. If the market is to continue its current trend, the trendline should provide either support or resistance. Keeping that trend going. An upward sloping trendline can provide support for a bullish market. A downward sloping trendline can provide resistance for a bearish market.

It is key that you understand that a traditional trendline that is upward sloping will only connect swing lows and an upward sloping line that connects swing highs is not a trendline. We consider an upward sloping trend line that connects swing highs to be a channel target line.

Trendlines are more than just lines on a chart; they are potent tools for spotting the overall direction of the market. By connecting key swing highs or lows, traders can visually track whether the market is trending up, trending down, or moving sideways. This helps remove emotional bias and brings structure to trade planning. When price consistently respects a trendline, it signals the strength of that trend. Traders can utilize this information to align their trades with the prevailing market direction, thereby increasing the likelihood of success. Trendlines also act as visual checkpoints, helping traders determine when a trend is intact and when it may be starting to break down.

Trendlines generally fall into three categories:

• uptrend lines
• downtrend lines
• and horizontal lines

Each type serves a distinct purpose and reflects different market behaviors.

Understanding the type of trendline you’re observing helps determine how price is behaving and what kind of opportunities may be available. It also plays a key role in managing risk and setting targets.

An uptrend line is drawn by connecting two or more rising swing lows. This line acts as a guide for potential pullbacks and signals areas where buyers may re-enter the market. As long as price holds above this line, the trend is considered strong.

A downtrend line, on the other hand, connects two or more descending swing highs. It functions as a ceiling during a bearish trend, showing where sellers have historically stepped in to push price lower. If price breaks above a well-established downtrend line, it could be an early sign of a trend reversal or a shift in market sentiment.

Identifying these trendlines and monitoring how price interacts with them can give traders a clearer sense of direction, momentum, and possible reversal points.

Trendline resistance or trendline support does the same thing that any other support or resistance does. It shows you when a market held support or failed against resistance, and it shows you where you might want to put a stop above support or below resistance.

If you've held a point of a trendline and then you have a trigger of a trade down the road, you could say - this trendline held so far so I can put my stop above the trendline on a short or below the trendline on a long.

What you're trying to do is gather information, to put together a high probability trade. If you're trying to put together a 100% probability trade, I hate to say this, but you should stop trading because you're going to lose your money because they don't exist.

The term magnetic trendlines refers to how price action often appears to be drawn back to key trendlines, even after short-term breaks or deviations. These trendlines act almost like magnets as price may temporarily move away from them but frequently returns to retest or hover around these levels. This behavior can be attributed to the psychological significance traders attach to these lines. When a trendline has been tested multiple times, it gains credibility in the eyes of market participants, and as a result, price tends to respond to it more consistently. Recognizing this “magnetic” quality can help traders anticipate potential bounce points, validate setups, and avoid false breakouts.

Trendlines are most useful when the market is showing directional movement, whether that’s trending up or down. In a strong trend, drawing a trendline helps highlight the path of least resistance and offers clear zones for potential pullbacks or breakouts. You should use a trendline when there are at least two or more clear swing points to connect, and especially when those levels align with previous price reactions.

Trendlines are less effective in choppy, sideways markets where price lacks a clear structure. In those conditions, horizontal support and resistance may provide more reliable insights. It’s also important to regularly reassess trendlines—markets evolve, and a valid trendline today may lose its relevance if new price action diverges from its slope. Ultimately, use trendlines when they help you stay objective and consistent in your analysis, not when they force a bias.

The difference between a trendline and a target line is that the trendlines provide possible support or resistance that would enable the trend to continue. A target line, however, is just a potential target area where the current trend might be forming another swing.

A combination of trendlines and target lines forms a number of traditional chart patterns like channels or flags.

What validates a traditional trendline?

Traditional trendlines require three points to become valid:

• The Initiating Point
• The Validating Point
• The Confirming Point

The more a trendline is tested and holds, the more significant it is, and the higher the time frame, the more significant a trendline is.

Trendline trading can be profitable when used correctly, but like any trading tool, it’s not a guarantee. The actual value of trendlines lies in their ability to bring structure and clarity to chart analysis. When combined with proper risk management, confirmation patterns, and a disciplined trading plan, trendlines can help identify high-probability setups and improve timing on entries and exits.

However, profitability doesn’t come from drawing lines alone. Traders must learn to adapt trendlines to evolving market conditions, validate them with price action, and stay patient for quality setups. Many of the most successful traders utilize trendlines as part of a comprehensive approach that encompasses volume analysis, candlestick patterns, and macroeconomic context.

When applied with precision, awareness, and experience, trendlines can play a valuable role in a consistently profitable trading strategy.

This content (the “Content”) is produced by Bob Iaccino. The Content represents the views and opinions of Mr. Iaccino. Bob Iaccino is compensated by TradeZero for participating in Live Sessions and for broadcasting, displaying, and/or presenting marketing and sponsorship materials that promote TradeZero. Mr. Iaccino’s trading experiences and accomplishments are unique, and your trading results may vary substantially from his. TradeZero is not responsible for and neither affirms nor endorses any of Mr. Iaccino’s views or opinions expressed in the Content. TradeZero makes no representations or warranties with respect to the accuracy of the Content or information available through any referenced or linked third party sites. The Content has been made available for informational and educational purposes only and should not be considered trading or investment advice or a recommendation as to any security.

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