A dynamic trend line is a trend line around which a financial instrument is oscillating during a trend.
A bearish dynamic trend line is in place when a financial instrument is declining along it or a consolidation is taking place
during that bearish trend.
In fact the dynamic trend line is the median line of that declining consolidation.
The same is also true for a bullish dynamic trend line. Similarly to the horizontal consolidation, the volatility is low, and one
can buy or sell on either side of the dynamic trend line. The best or more reliable dynamic trend lines are those from which
the price is deviating, but with almost the same distance before retesting them (or crossing them to the either side without going
too far away from them).
One can measure that distance and use it to find rewarding trading setup.
The dynamic trend line also represents the dynamic true value of the financial instrument. It is recommendable to leave those
trend lines on the chart for technical trading purposes.
Note that the consolidation is in this case is also dynamic, but similarly to the normal consolidation, a breakout will occur at one
stage.
In most cases, the breakout occurs when the price finally breaks above or below the dynamic consolidation. In effect,
the deviation becomes wider during the breakout. In most circumstances, the price can retest either the top of the consolidation
or dynamic trend line itself.
In the financial markets, a technical trader will also notice that some stocks can exhibit multiple dynamic trend lines
during an uptrend or downtrend. The price will often ride one of those dynamic trend lines for sometime before switching to a
new one after a breakout.
Technical traders can also use the angle between two dynamic trend lines, and project that angle vertically in the direction of the
breakout.
In the case of multiple dynamic trend lines, it is common that at the end of the trend as the correction is underway, that correction
may end on or near one of those former dynamic trend lines.
One should also pay attention to the intersection between the dynamic trend lines as it coincides with a hot spot trading zone.