Trendline
A line drawn connecting price highs or lows — a tool to see at a glance whether the flow heads up, down, or sideways.
In plain terms
Even jumpy prices have a big direction. To make that direction easy to see, a trendline connects the lows (or highs) with a ruler.
Lows connecting ever higher is an uptrend line (rising to the right); highs connecting ever lower is a downtrend line (falling to the right).
What it tells you
A trendline is not a tool to predict the future but one to visually organize which way the flow so far is heading. It lets you see at a glance whether the flow is up, down, or sideways, and whether it is holding or breaking.
Like support/resistance, a trendline works to some extent because many people watch the same line. When everyone moves similarly thinking "the flow might turn here," that expectation can become self-fulfilling.
Formula
no set formula — uptrend line = a line connecting meaningful lows / downtrend line = one connecting highs. Draw two such lines in parallel and it is a "channel."
What high or low means
As long as price moves above an uptrend line, the up-flow is seen as holding.
Breaking below an uptrend line is read as the flow weakening; breaking above a downtrend line, conversely, as the flow reviving.
In hindsight, a perfect trendline always appears on a chart (hindsight bias of feeling "I knew it"). But in real time it is unclear which points to connect, so a neat trendline is usually clear only when looking back.
A trendline is drawn differently by each person and is not objective. Moreover, whether the vertical axis is drawn linear or logarithmic changes the trendline's shape for the same data.
It looks only at price action, unrelated to company value, and is not itself a buy/sell signal.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see Trendline and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.