What is a Trend Line?

A trend line is a series of plotted data points that indicate a direction. The trend line may be extended to indicate a future direction by using a moving average calculation, exponential smoothing, or some similar technique. Trend line analysis is useful for budgeting and forecasting, and is commonly used in technical analysis. A technical analyst uses this information to support stock trading activity; this involves calculating a trend line from an underlying data set in order to ascertain the direction in which market prices are moving.

An example of a trend line appears in the following exhibit, where it is compared to cyclical and seasonal patterns.