Unit 1 · Technical Analysis Basics

Trend Identification

Lesson 5 of 86 min6 exercises

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The Trend is Your Friend

One of the oldest sayings in trading is "the trend is your friend." Trading with the trend dramatically increases your odds of success. Fighting the trend is how most traders lose money.

The Three Types of Trends

Uptrend (Bullish)
- Higher highs and higher lows
- Each peak is higher than the last
- Each dip finds support at a higher level

Downtrend (Bearish)
- Lower highs and lower lows
- Each peak is lower than the last
- Each rally fails at a lower level

Sideways (Ranging/Consolidation)
- Price bounces between support and resistance
- No clear higher highs or lower lows
- Often precedes a breakout

Example

Uptrend in action: Low: $20 → High: $25 → Low: $22 → High: $28 → Low: $24 Notice: Each low ($20 → $22 → $24) is higher than the previous low

Higher lows are the key to confirming an uptrend