Principles of technical analysis
Trend: up, down and sideways
4 min
A trend is the prevailing direction of price over a chosen period. Reading it correctly is the foundation everything else builds on.
The three trend states
- Uptrend — a series of higher highs and higher lows. Each pullback bottoms above the previous one and each rally peaks above the previous one. Buyers are in control.
- Downtrend — a series of lower highs and lower lows. Sellers are in control.
- Sideways (range) — price oscillates between a roughly horizontal ceiling and floor with no net progress. Neither side dominates.
How to read it on a chart
Mark the recent swing highs and swing lows by eye. If both are stepping up, you are in an uptrend; both stepping down, a downtrend; neither, a range. A simple moving average sloping up, flat or down gives the same answer at a glance.
The catch
- Trend depends on timeframe. A market can be in a daily uptrend and an hourly downtrend at the same time. Always state which timeframe you mean.
- Trends end. The higher-high/higher-low rhythm breaks eventually; the skill is noticing the first lower low after an uptrend, not assuming the trend is forever.
The famous shorthand — the trend is your friend — is true right up until the moment it bends. Treat trend as a bias, not a promise.
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