1# Ascending Trendlines
Ascending trendlines are a line that shows price moving in a bullish trend. These trendlines are formed by connecting consecutive higher lows in the market and are also seen as a form of support. Specifically, dynamic support as they are not horizontal. It is then a good place to look for potential buy/long trades from our ascending trendlines.
Trendlines, like support need to be confirmed and so we are looking for multiple touches of a trendline to confirm it as valid.
Let’s take a look at how we can use trendlines in our trading.
Here we have AUD/CAD on the 4 hourly. As you can see price made consecutive higher lows marked by our blue circles. If we connect these initial 2 lows and extend our trendline into the future we can see that price did make a 3rd touch on the trendline confirming our entry point and then made a nice rally to the upside which would have been a very profitable trade for us.
2# Descending Trendlines
Descending trendlines are the opposite to ascending trendlines. They help us identify when price is in a downtrend. These trendlines are formed when we connect consecutive lower highs in the market and are also seen as a form of resistance. Although like ascending trendlines, these descending trendlines are seen as dynamic resistance due to the fact they are not horizontal. Therefore, we would be looking for potential sell/short trades at our descending trendlines.
As with ascending trendlines, these descending trendlines need to be confirmed and at Celestial Trading Tools we like to look for a 3rd touch to provide us with our best possible trading opportunities.
Let’s now take a look at an example.
Above we have an AUD/USD Daily chart. As you can see we were making clear lower highs once again shown by our blue circles. If we connect the first 2 and extend our trendline into the future we can see we actually made a 3rd touch giving us a nice entry point for some short trades which would have been very profitable and in this case later on in the cycle we did in fact make a 4th touch which could have also been used for an entry for a profitable short trade.
Thank you for reading this bitesize article and we look forward to seeing you in our future bitesize articles on Celestial Trading Tools educational blog!