Seaside Town · Camp 4 · Lighthouse
Following the trend
The road up to the lighthouse is steep and winding. From up high the sea looks different: instead of single waves, you see which way the tide is running. In this last camp, you'll learn to read the trend.
The camp's rules
- 01
Uptrend: each peak higher than the last (HH), each trough higher than the last (HL).
- 02
Downtrend: each peak lower than the last (LH), each trough lower than the last (LL).
- 03
A trend lasts until the last higher low (HL) breaks in an uptrend, or the last lower high (LH) in a downtrend.
- 04
In a trend, a pullback is an opportunity, not a threat: in an uptrend buy the dip, in a downtrend sell the rally.
- 05
Don't chase a move you've missed: if there's no sensible place for a stop, there's no trade.
- 06
Decision order: trend first, then the level, then the candle at the level.
Teaching
Like a staircase
In an uptrend, price climbs like a staircase: each peak higher than the last, each trough higher than the last.
HH (higher high): a higher peak. HL (higher low): a higher trough.
As long as that structure holds, the trend is still on.
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When does the structure break?
An uptrend breaks when price closes below the last higher low (HL).
That shows buyers can no longer defend the troughs.
What matters is the trough breaking, not a single red candle.
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The staircase down
A downtrend is the mirror image: each peak lower than the last, each trough lower than the last.
LH (lower high): a lower peak. LL (lower low): a lower trough.
In a downtrend, the pullbacks up are where sellers step back in.
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The end of the pullback
The best place to trade with the trend isn't the middle of the move. It's the end of the pullback.
In an uptrend, when price pulls back and holds at the level of the previous peak or in a demand zone, the risk is small: the stop goes below the trough where it held.
A demand zone is where buyers stepped in before; in other words, support. Where sellers stepped in before is called a supply zone; in other words, resistance.
The signs of a hold are familiar from earlier camps: lower wicks, a hammer, a bullish engulfing.
Nazım · Lighthouse keeper
Lessons · 5
- Story
The tide
See which way the tide is running, not just the waves.
- Lesson
Higher highs, higher lows
Read the structure of an uptrend and know when it breaks.
- Lesson
The downtrend
Spot a downtrend and look for trades in the trend's direction on the pullback.
- Lesson
A pullback is an opportunity
Find the right entry in a trend, and don't chase a move you've missed.
- Exam
Lighthouse exam
Put candles, levels and trend together: six realistic charts.
Test yourself
When is an uptrend considered broken?
- ✓ When price closes below the last higher low
- · When two red candles come in a row
- · When a doji forms
A trend is a sequence of peaks and troughs. When the last higher low breaks, the sequence breaks: buyers can no longer defend the troughs.
If peaks and troughs keep repeating at the same levels, what is the market doing?
- ✓ It's in a range
- · It's in an uptrend
- · It's in a downtrend
The peaks aren't rising and the troughs aren't falling: buyers and sellers are in balance. That's a range, and the trade ideas are at the edges.