How do I know what the trend is?

Look at the pattern of highs and lows. Higher highs and higher lows mean an uptrend; lower highs and lower lows mean a downtrend; neither means the market is ranging sideways. Reading this on a higher timeframe gives the clearest view.

How many points do I need to draw a trend line?

You need at least two swing points to draw a trend line and ideally a third touch to confirm it is valid. The more times price respects the line, the more significant it becomes to the traders watching it.

A channel is a pair of parallel trend lines, one along the swing lows and one along the swing highs, that contains price as it trends. Traders use the boundaries to judge where a move might pause, bounce or break out.

Should I ever trade against the trend?

Counter-trend trading is possible but much harder and riskier, since you are betting against the prevailing momentum. Beginners are far better served trading with the trend until they have built real experience and a proven edge.

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Strategy · Trends

Trend Lines and Spotting a Trend

The trend is your friend, as the saying goes. Learn how to identify an uptrend or downtrend, draw clean trend lines, and trade with the market rather than against it.

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Trading with the trend is one of the oldest pieces of market wisdom, and one of the most useful. Before you worry about entries or patterns, learning to see the trend, and to draw it, puts the odds on your side.

What is a trend?

A trend is simply the general direction price is moving. An uptrend is a series of higher highs and higher lows; a downtrend is lower highs and lower lows. When price makes neither, it is ranging, moving sideways.

Uptrend, downtrend and range

Identifying which of these three states the market is in should come before any trade. Trend-following strategies thrive in trends and struggle in ranges, so knowing the difference tells you which tools to reach for.

Drawing trend lines

A trend line connects the swing lows in an uptrend, or the swing highs in a downtrend. You need at least two points to draw one and a third touch to confirm it. A clean trend line acts as dynamic support or resistance that traders watch closely.

Channels

Draw a parallel line on the opposite side of price and you have a channel. Price often bounces between the two boundaries, offering a visual guide to where a move might pause or turn within the trend.

Trading with the trend

The simplest edge is to trade in the direction of the trend: look for buying opportunities in an uptrend and selling opportunities in a downtrend. Fighting a strong trend is possible but far harder, and best left until you have real experience.

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A note on risk
This guide is for educational purposes only and is not financial advice. Trading forex and CFDs carries a high level of risk and can result in the loss of all your capital. Most retail investor accounts lose money. Make sure you understand the risks and seek independent advice if needed before trading.