Trends
Beginner · 2 min
Every chart looks obvious once it is behind you. The hard part is telling, while you are in the middle of it, whether a share is actually trending or just wandering. This lesson is about that difference, and about how little the answer tells you.
Open any chart and you will see stretches where the price climbs, stretches where it falls, and long stretches where it goes sideways. The first two are called trends. The idea behind trading them fits in one sentence: buy while a share is climbing, stay out while it is falling. All the difficulty is in deciding which of the three you are looking at right now.
- trend
- A run of moves in one direction where each peak is higher than the one before it and each dip is also higher — or, falling, each one lower. A share doing neither is said to be going sideways.
- moving average
- The average closing price over a fixed number of recent days, worked out again each day so the line moves along with the price. A 50-day moving average is a smoothed version of where the price has been sitting lately.
Higher highs and higher lows is the whole definition, and it is worth being strict about it. "The price went up this week" is not a trend, it is a week. A trend is a pattern that has already repeated several times — which also means you cannot see one until several of those turns have happened.
In this topic
Trend lines and moving averages both describe what has already happened.
Intermediate · 2 min
Where to get in, where to get out, and what the method cannot promise.
Intermediate · 2 min
Try this in the app
- Research — open a share and look at its price history
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Works with
- Support and resistance — Prices where a share has repeatedly stopped falling, or stopped rising.
- Candlestick charts — Each candle packs a whole day of trading into one shape.
- Key points and breakouts — Some prices matter more than the rest, and a share that clears one is telling you something.
- The rules around the key point — What you buy, how much, and when you add are separate decisions the key point does not make for you.
- Head and shoulders bottom — Three lows, the middle one deepest, and a line across the bounces between them that the price has to close above.
- Ground volume — When trading in a share dries up to almost nothing, the quiet itself is information.
- Volume in a pullback — When a rising share dips, how fast its volume shrinks is read as a sign of how the dip will end.
- When the KDJ indicator misleads you — KDJ reacts to every wobble, so most of its crosses are noise — here is how people decide which ones to ignore.
- Checking the longer chart — Look at the same share on a weekly chart before you trust a cross on the daily one.
- Letting the trend go first — Ignore KDJ crosses against a strong trend until the price breaks its trend line.
- The hammer candle — A small body on a long lower wick, after a fall — and why one candle is never the whole story.