Taking advantage of automated trendlines

You can take some of the subjectivity out of trendline drawing by using a software package that constructs trendlines for you. All you have to do is choose your preferred time frame, and the software does the rest. Even Microsoft Excel includes this option in its charting function. (In Chapter 4, I explore how to use Excel for charting, but for now, I point out the way Excel determines a trendline for the data presented.)

Figure 11-2 displays the same data as Figure 11-1, but instead of the hand-drawn approach, this trendline was generated by Excel. The placement of the line is a bit different than in Figure 11-1, but the trend is still clearly positive.

Using software cuts down on the subjective nature of trendlines, but it doesn't completely remove subjectivity. There's still a subjective component to software-drawn trendlines. The user still determines the time frame for the trendline, which can have a definite impact on the type of line that's generated. As with any computer program that involves user input, the data you get out is only as good as what you put in.

Figure 11-2:

A chart with an automated trendline placed on it.

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