GlossaryLevel 2
What defines a trend
A trend is the overall direction read from how the swing highs and lows line up. In an uptrend every new high is higher than the last and every new low is higher too — "higher highs, higher lows". A downtrend is the mirror image: lower highs and lower lows. When highs and lows keep hitting the same areas without producing direction there is no trend; that is a sideways market, or range, and the sentence "there is no trend here" is a valuable finding in its own right, because it tells you that every tool built on the assumption of a trend is meaningless for now. Applying the definition on a chart means marking the last few swings and comparing each point with the previous point of its own kind. The common misreading comes in two forms: declaring a trend from three candles, and reading a trend as a promise. "The trend is your friend" describes a tendency to continue, not a promise of continuation; every trend ends, and you only see that it has ended once the sequence breaks. Nor does a trend tell you which timeframe it belongs to. The lesson for risk literacy: a trend is a description of the current state, never a calendar.
This content is educational information, not personalised investment advice. The chart examples are illustrative.