Trends and Trendlines
When trading trends and trendlines you will notice that most of the time markets are not actually trending, they are moving sideways. These are referred to as range bound markets. This is especially the case with most kind of shares in medium sized and small companies. The shares or contracts that are traded in the markets when they are range bound vary little in price. they will tend to have an upper threshold and a lower threshold forming the range. These become Support and Resistance levels for the market. Price tends to move to the upper threshold and then make its way down to the lower threshold before reversing again.
Eventually price breaks out from these ranges and either the Support or Resistance level of the range changes to Resistance or Support. Support becomes Resistance or Resistance becomes Support.
When price leaves a range it may make several breakouts in either direction before finding a longer term direction. The reaction of price at Support and Resistance levels can offer a clue to when this is likely to happen.
When price finally decides on a longer term direction it may power away in that direction leaving the old range way behind. It may start developing into a trend.
In trends price doesn’t move only in one direction. It fluctuates as always. However it does move mostly in one direction and it moves with purpose.