Which points it joins
In an uptrend you join the lows, because the lows are where buyers keep stepping in earlier than last time. In a downtrend you join the highs. Never both on the same line: a line drawn through the middle of the candles is a line drawn through nothing, and it will fit any chart you like.
Two touches is a guess, three is a line
Any two points define a line. The third touch is the first evidence that other people are seeing the same thing. Until then the line is a hypothesis, and treating a hypothesis as a level is how a trader ends up with a chart covered in lines that each looked right once.
Bodies or wicks
There is no settled answer and it matters less than being consistent. Wicks capture where price actually traded; bodies capture where it was willing to close. Pick one, use it everywhere, and your lines will at least be comparable to each other. Switching between them until a line fits is drawing the conclusion first.
What a break means
That the pace of the trend changed, not that it reversed. A trendline break very often just means the market is going sideways for a while. It is a reason to stop assuming continuation, not a reason to trade the other way.
Channels
A parallel line on the opposite side turns a trendline into a channel. It is useful for setting expectations about where a move might run out, and useless as a guarantee. Price leaves channels regularly, and a channel that has held four times is not more likely to hold the fifth.
In short
| Uptrend line | Joins the rising lows |
|---|---|
| Downtrend line | Joins the falling highs |
| Minimum for confidence | Three touches |
| A break signals | The pace changed, not that it reversed |
Common questions
How many touches does a trendline need?
Two to draw it, three before it is worth much. Each extra touch is one more piece of evidence that other people are watching the same line.
Should I use wicks or candle bodies?
Either, consistently. The mistake is switching between them so that a line always fits — at that point the line is describing your preference rather than the market.
Is a trendline break a sell signal?
No. It says the trend has stopped behaving like a trend. The most common outcome is a range, not a reversal, and trading it as a reversal is a common way to be right about the break and wrong about the trade.
Trading forex and CFDs on margin carries a high level of risk. Most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade.