Lesson 2 of 5 · 4 min read
Recognizing trends
The trend is your friend — but only if you see it.
Uptrend
An uptrend = a series of higher highs and higher lows. As long as that pattern is intact, the trend is up. Draw a line under the lows: that's your trendline.
Downtrend
A downtrend = lower highs and lower lows. Buying against a downtrend ('catching a falling knife') is risky — the trend is against you.
No trend = range
Often a price simply moves sideways (a 'range'). Then trend strategies work poorly; you trade instead between support and resistance.
Remember this
- Uptrend = higher highs and higher lows; downtrend is the mirror image.
- Draw a trendline under the lows to confirm the direction.
- Buying against a downtrend ('falling knife') is risky.
- No trend = range; then trend strategies work poorly.
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