Trend

A trend is the prevailing direction of price. The classic definition looks at swing points:

• Uptrend: a series of higher highs and higher lows.
• Downtrend: a series of lower highs and lower lows.
• Sideways (range or [consolidation](/glossary/consolidation)): no clear sequence either way.

Traders also define trends with tools such as moving averages, for example "price above a rising 200-day average", or with trend lines connecting swing lows or highs.

Timeframe matters

A pair can be in a downtrend on the weekly chart, an uptrend on the daily and a range on the hourly, all at once. That is why many traders start from a higher timeframe to set context and then look for entries on a lower one. See multiple timeframe analysis.

Example

Illustrative figures on a daily USD/JPY chart: swing lows at 145.20, 146.80 and 148.10, and swing highs at 147.50, 149.30 and 150.60. Each high and low is above the previous one, which meets the definition of an uptrend. If the next pullback falls below 148.10, the most recent higher low, the uptrend structure is broken, though that does not by itself mean a downtrend has begun.

Common misconceptions

• "The trend is your friend" is a rule of thumb, not a law. Trends end, often abruptly, around central bank decisions or major data.
• Trends are clearer in hindsight. On the right-hand edge of the chart, a pullback and a reversal look the same.
• Counter-trend signals: overbought or oversold readings are common in strong trends and are not reliable reasons to bet on a reversal.

See trend following and moving averages and price action trading.