In this class, we will discuss the core concept of trends in trading.

🧐 Think about what a trend is?

In trading, a trend refers to the main direction in which the price moves over a period of time. You can think of a trend as the direction of the water flow in a river—where the water flows, the price goes.

🎈 Why is the trend important?

  • Following the trend is the core principle of trading
    As the saying goes,"The trend is your friend"If the market is rising, going long (buying) is more likely to be profitable; if the market is falling, going short (selling) may be more profitable. Trading against the trend is not only tiring but also risky.

  • Help you determine buy and sell points
    In an upward trend, buying during a pullback is a wiser choice; whereas in a downward trend, selling during a rebound is a better strategy.

  • Avoid ineffective operations
    During a sideways trend, the market fluctuates minimally, and many beginners frequently enter and exit, resulting in merely paying "transaction fees." Recognizing the trend can help you avoid such ineffective actions.


📖 How to determine the direction of a trend

Determining a trend requires combining price movements with technical tools. Here are a few common methods:

  1. Observe high and low points

    Upward trend: High and low points continually rise

    Downward trend: High and low points continually fall

    Sideways trend: High and low points fluctuate within the same range

  2. Use technical indicators

    Use moving averages (MA) to determine

  3. Trend lines

    Draw a straight line connecting the price lows or highs on the candlestick chart, and observe whether the price moves along this line.

🏷️ How to identify a trend reversal


A trend reversal refers to a change in the direction of the market price movement. Here are some common judgment methods:

1. Candlestick pattern reversal signals:

  • Head and shoulders top/head and shoulders bottom

  • Double top/double bottom (M shape/W shape)

  • Single reversal candlestick

2. Technical indicator reversal signals

  • RSI divergence

  • MACD death cross/golden cross

  • Bollinger Bands breakout

3. Breakthrough of key support/resistance levels

  • When the support level breaks during a pullback, the upward trend turns into a downward trend.

  • When the resistance level breaks during a pullback, the downward trend turns into an upward trend.