Trends: higher highs and higher lows

Trend is structure

Price rarely moves in a straight line. It moves in waves: a push, a pullback, another push. The turning points of those waves are called swing highs and swing lows, and their sequence defines the trend.

• Uptrend: higher highs and higher lows. Each rally reaches above the last peak, and each pullback stops above the last low.
• Downtrend: lower highs and lower lows.
• Range: highs and lows at roughly the same levels. No trend.

Why the staircase forms

In an uptrend, buyers are willing to pay more over time. Pullbacks happen as some traders take profit, but new buyers step in before price gets back to the previous low. That is what a higher low is: demand arriving earlier than last time. A higher high shows buyers pushing through the level where sellers stopped them before.

When a trend is in doubt

An uptrend stays intact while the sequence holds. The first warning is a lower high: a rally that fails below the last peak. The clearer signal is a close below the most recent higher low, which breaks the staircase.

A broken trend does not mean the opposite trend has started. Price often moves sideways for a while first. Reversal patterns such as the head and shoulders and the double top are ways of reading that transition.

Why this matters for patterns

Every pattern on this site starts with the trend before it.

• Reversal patterns need a trend to reverse. A double top without an uptrend before it is just two touches of resistance.
• Continuation patterns such as the bull flag are pauses inside a trend. They only make sense if the trend is there.

Common mistakes

• Calling a trend from a few candles. Look at the swings, not individual candles.
• Mixing timeframes. A market can be in an uptrend on the daily chart and a downtrend on the hourly chart at the same time. See timeframes.
• Expecting trends to last. A trend describes what has been happening. Trends end, and there is no rule for when.