Technical analysis by currencynerd about Symbol BTC on 8/22/2025

Trendlines: The Most Misused Tool in Trading If I had a pip for every time a trader got faked out by a “trendline breakout,” I’d probably have more profits than most retail traders combined. Trendlines are one of the simplest, oldest, and most powerful tools in technical analysis yet they’re also one of the most misused. Most traders rely on what they’ve been taught in books, courses, or quick YouTube tutorials without putting in the hours of backtesting and screen time. And as every trader eventually learns: theory is a different game than practice. A book may say: Buy the breakout of a bearish trendline. But in practice? Price fakes out, you get stopped, and frustration builds. Or: Sell at the touch of a bearish trendline. Then price rallies and breaks the line. Again, stopped out. The problem? Markets love to trap traders here. False breakouts, wicks, and algo-driven liquidity hunts chew up traders who rely only on “trendline piercing.” If that’s your main strategy, you’re not trading the market, the market is trading you. But here’s the truth: trendlines aren’t the problem. The way traders use them is. This doesn’t mean the trendline is invalid. It means the application is shallow. For me, trendlines are non-negotiable when analysing. But I don’t take trades just because of a line. I use them in specific, tested ways that give structure to my trading and reduce false signals. Here are the two core methods I use trendlines in my trading: 1. Trendlines as a Measure of Momentum Momentum is the speed of price, not just the price itself. And trendlines can act as leading indicators of momentum shifts. For example: A break of a bullish trendline doesn’t instantly mean “sell.” It means momentum has shifted from bullish to bearish. That’s my cue to look for sell setups that align with my strategy. As long as price respects a bullish trendline, it signals buyers are in control, and I look for buy setups. Vice versa for bearish lines. Think of trendline breaks not as signals but as context for setups. They tell you where the wind is blowing, not when to set sail. For me, a trendline break means nothing unless a full OHCL candle (Open, High, Close, Low) forms entirely above or below the line. Why? Because a wick through a trendline is just noise, it’s the market testing liquidity, not shifting momentum. A confirmed close beyond the trendline signals that the crowd has moved, and the trend’s character is changing. This approach drastically reduces false signals. Instead of jumping at the first poke through the line, I wait for commitment. Think of it like waiting for the market to sign the contract rather than just flirt with the idea. chart example : 2. Trendlines as Dynamic Support & Resistance The second use is less about breakouts and more about reaction levels. A clean, well-respected trendline acts like a dynamic S/R zone, guiding how price reacts when tested. In uptrends, I look for bounces off the rising trendline as opportunities to join the momentum. In downtrends, I treat the falling trendline as overhead resistance a zone to fade rallies or time entries. What makes trendlines powerful here is context: they’re not static like horizontal levels but move with the market’s rhythm adapting as price makes new highs or lows. When combined with volume, candlestick structure, or confluence with horizontals, they create highly reliable zones. Yes, false breaks happen but this is where order flow, confluence, and top-down analysis come in. The more aligned factors you stack with a trendline, the higher the probability of a valid setup. chart example : the other great thing about this is that the law for support and resistance also applies here where previous support acts as resistance and vice versa chart example : nerdy conclusion : trendlines alone won’t make you money. They aren’t buy or sell signals by themselves. But used correctly, they’re an incredibly powerful map of momentum and dynamic structure. Most importantly, don’t throw them out just because a few breakouts failed. That’s not the trendline’s fault, it’s the method. The smarter nerdy approach is: Wait for full OHCL confirmation beyond the line before calling it a momentum shift. Use trendlines as dynamic support/resistance to trade with structure, not noise. put together by : Pako Phutietsile as currencynerd courtesy of : TradingView