Trend

A trend is price moving in the same direction over a stretch of time. Not in a straight line, though, but in waves: price pushes, pulls back a little, then pushes again.

In an uptrend each high is above the previous high and each low above the previous low. In a downtrend both fall. That sequence defines the trend, not the colour of individual candles. Lots of green candles is not a trend; if the lows aren't rising, there is no uptrend.

The most sensitive part of the sequence is the lows. An uptrend lives on buyers stepping in higher on each pullback than the last time. If a pullback drops below the previous low and closes there, buyers failed to defend that level. Even with a fresh high behind it, the structure is no longer what it was.

Trend direction depends on the timeframe you're looking at. A market rising on the daily chart can look like it is falling for hours on the 15-minute chart. Talking about a trend without naming the timeframe leaves the sentence half finished.

Mark the clear turning points. Say EUR/USD rises from 1.0780 to 1.0830, pulls back to 1.0805, climbs to 1.0862, then pulls back to 1.0828. Highs at 1.0830 and 1.0862, lows at 1.0805 and 1.0828. Both are rising: that is an uptrend.

Now find the level that would break it. That is the last higher low, 1.0828. If the next pullback stops at 1.0835 and turns up, the trend is intact and that low becomes the new higher low. If the pullback closes at 1.0815 with a body, the last low has broken.

After the break price may try to recover. That recovery doesn't have to be the old trend resuming. If price rises to 1.0850 and turns below the previous high at 1.0862, the first lower high forms and the structure has turned down. If the recovery closes above 1.0862, the uptrend is rebuilt. Until one of those happens, all you have is a broken structure.

Stop logic comes from the same place. Someone buying with the trend places the stop below the last higher low, because if price breaks it the uptrend idea is broken. Entry 1.0845, last low 1.0828 puts the stop around 1.0825, 20 pips of risk; that distance is 1R.

Defining the trend by how far price has risen. Price may have climbed 200 pips in a week, but if the last pullback broke the previous low, today's structure is not an uptrend. The size of the past move doesn't replace the present structure.

Buying a trend that has already broken. An eye used to the rally reads the broken low as a discount. But the level buyers defended is gone, and so is any sensible low to put your stop behind. A trade without a place for the stop has no 1R either.

Trying to call the end of the trend. It has gone up too much, it must fall now is a feeling, not a structural read. A trend lasts until its structure breaks; hunting for the top before that usually means getting stopped out against a rising market.

In ranges. When price moves sideways the highs and lows build no clear sequence; one rises, the next falls. Look at the range edges instead of searching for a trend.

On very small timeframes. On a 1-minute chart a new little trend forms and breaks every few candles, and most of them vanish inside a single candle on a higher timeframe.

Around news. A major release can cross several turning points in one candle. That can mean the structure really changed, or it can be a reaction reversed minutes later. Deciding the trend is broken before the first post-news candles close is too early.