7. Trends – up, down and sideways
"The trend is your friend" is the oldest line in trading. But first we need to recognise a trend correctly.
Prices never move in a straight line. They move in waves – a push, a pullback, another push. The direction of those waves is the trend.
7.1 Three kinds of market
Uptrend – each high is higher than the last high, and each low is higher than the last low. Buyers are in control. Every dip gets bought.
Downtrend – each high is lower than the last high, and each low is lower than the last low. Sellers are in control. Every bounce gets sold.
Sideways (range) – price moves between a floor and a ceiling. Neither side is winning.
On the Kasara ghat road, the road goes up, then a small dip at a turn, then up again. Even with the dips, you are clearly climbing. Each turn is higher than the last.
That is an uptrend. The small dips don’t change the direction – until a dip goes lower than the previous turn.
7.2 Trendlines
A trendline is a straight line connecting the lows in an uptrend (or the highs in a downtrend).
- Connect at least two clear lows; a third touch makes it more reliable.
- Don’t force it. If you have to cut through many candles to draw it, it is not a good line.
- When price breaks the trendline strongly, the trend may be slowing – but a broken line alone does not mean the trend has reversed.
7.3 Why trade with the trend?
In an uptrend, buying is like swimming with the current. Even if your timing is a bit off, the trend can bail you out. Buying in a downtrend is swimming against the current – you need perfect timing to win.
For beginners, a simple filter helps a lot: only look for buy setups in uptrends, and avoid buying in downtrends.
7.4 Test your eyes
Most beginners improve the day they stop catching falling knives. Girte hue chaaku ko pakadne ki koshish mat karo. If a stock is making lower highs and lower lows, it is not "cheap" – it is weak. Wait for the structure to change.
An uptrend makes higher highs and higher lows. Market Structure (Module 3) goes deeper into this.
A fall does not make a stock cheap on the chart. Until it stops making lower lows and lower highs, sellers are in control.
- Uptrend: higher highs and higher lows. Downtrend: lower highs and lower lows. Range: stuck between floor and ceiling.
- Trendlines connect lows in uptrends and highs in downtrends. Don’t force them.
- Trading with the trend is easier and more forgiving.
- Avoid catching falling knives.
- Ek line mein: Trend ke saath chalo, uske against tairne ki koshish mat karo – girte chaaku ko mat pakdo.