Recently, many people have been asking me how to properly read charts. I think it's finally time to explain what trend analysis is and how to use it in real markets.

Let's start with the basics. On financial charts, a trend line is simply a diagonal line that connects specific price points. It is one of the simplest yet most important tools in technical analysis. I see many people overlook this, and then they wonder why their forecasts don't come true.

We can distinguish two main types. The first is an upward trend line, drawn from bottom to top based on successive higher lows. The second is a downward trend line, running from top to bottom, connecting lower highs. The difference seems simple, but in practice, choosing the points makes a significant difference.

But here comes an important question: when does trend analysis actually have value? Most experts agree that a trend line should be tested at least three times to be trusted. If the price hits our line three times or more and bounces off it, then we know the trend is real, not just random fluctuations.

What interests me most? How the trend line shows support and resistance. An upward line acts as a support level, below which the price is reluctant to fall. Conversely, a downward line serves as resistance, which the price finds difficult to break through upward. When the price breaks one of these levels, the trend loses its strength, and the market often changes direction.

However, I must be honest: trend analysis is not foolproof. Every trader draws these lines differently. Some only look at the body of the candle, others consider the shadows. This introduces subjectivity into the entire process.

That's why I always pay attention to volume. If the price is rising but volume is decreasing, it could be a false signal. High demand should be supported by actual transactions.

One more thing: the scale of the chart matters. On an arithmetic scale, a change from $5 to $10 looks the same as from $120 to $125. But on a logarithmic scale, the first change is a 100% increase, while the second is only 4%. This changes the entire perspective on the trend.

My advice? Combine trend analysis with other methods. Don't rely solely on lines. Watch support and resistance levels, check volume, observe how the market behaves. Only then will you have a complete picture and significantly reduce risk. Technical analysis requires practice and the combination of different tools to truly be effective.