Lesson 4 of 10 · 8 min
Trends
Higher highs and higher lows, lower highs and lower lows. Learn the one definition of a trend that works, and how to spot it quickly.
By the end you'll be able to
- Define an uptrend, a downtrend and a range using swing highs and lows
- Mark the swing points on a chart
- Say which direction you should be looking to trade, and when to stand aside
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- 10 short lessons with quizzes and interactive tools
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“The trend is your friend” is the oldest advice in trading. It only helps once you can define a trend precisely.
Swings, not slopes
Step through the swing points. An uptrend is a staircase: each step up goes higher than the last, and each pause stops higher than the last.
A trend is defined by swing highs and swing lows:
- Uptrend: higher highs and higher lows.
- Downtrend: lower highs and lower lows.
- Range: highs and lows at roughly the same levels. No trend.
This is the whole definition. No indicators needed. If you can mark the last three or four swings, you know the trend on that timeframe.
Try it
Look at the swing highs and lows so far. What is this market doing?
Reveal the rest to see whether the trend continued. It often does, which is why trading with it is easier than against it.
Notice how the answer came from four swing points, not from any indicator or from how the chart “feels”.
What to do with it
In an uptrend, look for buys on pullbacks to a higher low. In a downtrend, look for sells on rallies to a lower high. In a range, either trade the edges or wait. The one thing not to do is fight a clear trend because it “has gone too far”.
Quick check
Question 1 of 3
Which sequence defines a downtrend?
Question 2 of 3
In an uptrend, where do traders usually look to buy?
Question 3 of 3
The last four swings on a chart are at similar levels. What is the market doing?
Go deeper: How to identify a trend · How to Draw Trend Lines in Forex: A Step-by-Step Guide · Pullback Trading: How to Enter a Trend Without Chasing It