Trendlines and channels: how to draw them and when they break

Draw valid trendlines from swing points, add a parallel channel, read a break, and avoid the most common trendline mistakes, with a EUR/USD example.

TA 1: Beginner Lesson 3 of 4 · 3 min read

⚠️ Risk warning: CFDs and leveraged forex are complex instruments with a high risk of losing money rapidly. Most retail accounts lose money. This content is education only, not investment advice or a recommendation.

EUR/USD H4: a rising channel and its break1.10901.11331.1175EUR/USD · H4123Break1, 2, 3 = swing lows on the trendline · a close below the line ends the channel; it does not tell you how far price will fallChannel line through the highsTrendline: 3 touches
EUR/USD H4: a rising channel and its break Illustrative chart: drawn data, not real prices.

A trendline is a quick way to see the slope of a trend and where pullbacks have been ending. Drawn well, it complements market structure; drawn badly, it fits whatever you want to see.

Drawing a valid trendline

  • In an uptrend, connect swing lows; in a downtrend, connect swing highs.
  • Two points draw a line; a third touch that holds is what makes it a trendline worth watching.
  • Do not cut through candle bodies to make it fit. Wicks may poke through slightly; choose one way (wicks or bodies) and stick to it.
  • Very steep lines break quickly. Gentle slopes tend to describe a trend better.

Channels

Copy the trendline and move it in parallel to the swing highs (in an uptrend) to draw a channel. The upper line shows where rallies have been stalling. In TradingView this is the Parallel channel tool; in MT5 the Equidistant channel. See the drawing tools guide.

When the line breaks

A close beyond the trendline ends the line, not necessarily the trend. Check structure: if price also breaks the last higher low, it is a change of character. If structure holds, the trend may just be slowing down and a new, flatter line may be needed. A break tells you nothing about how far price will go.

Worked example: EUR/USD, H4. The figure uses drawn prices. Swing lows at 1.1060, 1.1100 and 1.1140 sit on one rising line (touches 1, 2, 3). A parallel line through the highs at 1.1125, 1.1165 and 1.1205 completes the channel. After the third high, price closes below the trendline and falls to about 1.1120, also below the last higher low at 1.1140, so both the line and the structure have broken.

Educational only. Trendlines are subjective; two analysts can draw different lines on the same chart.

🛠️ Practice task

  1. Open EUR/USD on H4 in TradingView or MT5 and find the current trend from swing points.
  2. Draw one trendline through at least two swing lows (or highs in a downtrend) without cutting candle bodies.
  3. Add a parallel channel line. Note how many swings touch each line.
  4. Set a price alert just beyond the trendline (see the alerts guide). When it fires, check whether structure also broke.

🎯 Mark this chart

Study the drawing, pick the letter, then check. This exercise does not count toward your progress; the quiz below does.

Gold daily: which line is a valid rising trendline?3,8993,9363,973XAU/USD · D1ABCD
Gold daily: which line is a valid rising trendline? Illustrative chart: drawn data, not real prices.
Which line is a valid rising trendline you could use as support?

Show answer

B: runs through three swing lows. B joins three swing lows without cutting through candle bodies. C is the upper channel line, a resistance line rather than support. D is a horizontal level based on a single touch, and A starts from a random candle and slices through bodies.

Gold daily: which line is a valid rising trendline?3,8993,9363,973XAU/USD · D1ABCD123
Solved: B touches three swing lows Illustrative chart: drawn data, not real prices.

✍️ Quick quiz

Check what you learned. Your answers stay in this browser.

1. In an uptrend, what does the trendline connect?

Show answer

Swing lows. Rising trendlines run under the market along the swing lows.

2. What makes a trendline more meaningful?

Show answer

A third touch that holds. Two points always make a line; the third confirms that the market respects it.

3. Price closes below a rising trendline but stays above the last higher low. What is the best reading?

Show answer

The line has broken, but structure is still up; the trend may be slowing. Structure decides the trend. A line break alone is weaker evidence.

4. How do you draw a channel?

Show answer

Draw a line parallel to the trendline through the opposite swings. A channel is the trendline plus a parallel line through the highs (uptrend) or lows (downtrend).