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
- 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
Using Trendlines
A trendline connects swing points to visualize the trend:
Uptrend line: Connect the lows (acts as support)
Downtrend line: Connect the highs (acts as resistance)
A valid trendline needs at least 2 points, but 3+ touches makes it more reliable.
Uptrend line: Connect the lows (acts as support)
Downtrend line: Connect the highs (acts as resistance)
A valid trendline needs at least 2 points, but 3+ touches makes it more reliable.
Tip
SUTOK uses fractal analysis to identify trends automatically. Look at the "Fractal Trend" indicator in your analysis results.
Trend Strength
Not all trends are equal:
Strong trend: Steep angle, small pullbacks, high volume
Weak trend: Shallow angle, deep pullbacks, declining volume
The ADX indicator (which SUTOK calculates) measures trend strength:
- ADX < 20: No trend / ranging
- ADX 20-40: Moderate trend
- ADX > 40: Strong trend
Strong trend: Steep angle, small pullbacks, high volume
Weak trend: Shallow angle, deep pullbacks, declining volume
The ADX indicator (which SUTOK calculates) measures trend strength:
- ADX < 20: No trend / ranging
- ADX 20-40: Moderate trend
- ADX > 40: Strong trend
Watch out
Trends don't last forever. Watch for signs of exhaustion: divergences, failed breakouts, and declining volume on moves.