The start of a trend is difficult to spot because at the beginning you only have one top or bottom to work with. You have to wait for prices to move in either direction and then react again before you will get a second top or bottom. As soon as this happens you can draw a line on your chart. As time goes on another top or bottom will be formed which may confirm your trend. With just three points to work on (tops or bottoms) a trend will have more authority. But 4 points are needed to confirm an actual uptrend, a low, high, higher low and higher high. The uptrend is then a line drawn across the lows.
However it is more likely that these tops or bottoms will not be exactly in line. At this point you can draw two lines on your chart. The first will be drawn from your first top or bottom to the second top or bottom, and the second from your first top or bottom to your third top or bottom.
Figure 13a shows this in operation in a rising market. Three bottoms have been generated but because they aren't in line, you actually have two uptrend lines - A and B.
Figure 13a
Progressing to Figure 13b you can see that another top and bottom has been created on the chart and that B looks like the more authoritative trend line.
Figure 13b
If, when progressing from 13a to 13b the next bottom had not been at a point consistent with either line A or B then you would have had to have drawn a third line, C, shown in Figure 13c.
Figure 13c
When you get three lines on a chart like this they are known as 'fan lines'. The rule of thumb is that when the data results in a third fan line a trend direction will be reversed. So from Figure 13c you can expect a generally uptrending market to turn into a downtrend. Similarly a series of downtrends in a falling market will be reversed into an uptrend by such a break.
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