Trend
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A trend describes the directional behavior of a market over a sequence of prices. At a basic level, we distinguish between an upward trend, a downward trend, and a market without a clear directional trend.
Basic Structure
An upward trend is commonly associated with progressively higher highs and higher lows. A downward trend is commonly associated with lower highs and lower lows. When price repeatedly moves within a relatively stable area without sustained directional progression, we may describe the market as ranging.
Trend is always relative to a timeframe. A market can be in an upward trend on a daily chart while moving downward on a shorter timeframe.
Why Trend Matters
Trend gives us a framework for describing market structure. It does not guarantee that the next price movement will continue in the same direction.
Key Terms
Trend, uptrend, downtrend, range, higher high, higher low, lower high, lower low, timeframe.
Knowledge Check
- What is a trend?
- What price structure is commonly associated with an uptrend?
- Why can trend direction differ between timeframes?