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The trend is your friend, and trades in the direction of the evolving trend always have a higher probabilities of success than those against the trend or in a sideways market. The idea of ​​what a trend is, is simple: An uptrend is defined as a series of higher highs and higher lows. A downtrend is defined as a series of lower highs and lower lows.

However, applying it in the markets is not so simple. Take a look at some real life charts, it's never that simple, yet it is possible, through practice to get a sense of what the trend is and where it is potentially heading.

The key factor here is practice. Take the simple definitions above and apply them when looking at charts. Keep practicing and the under structures structures will start to reveal themselves to your eye.

If you look at a chart and the price action is making a neat sequence of Higher Highs (HH) and Higher Lows (HL) then the chart is uptrending. The moment the price makes a Lower High (LH) or Lower Low (LL) then the price is no longer trending and is deemed to have no trend until such time that it begins to form a sequence of HHs and HLS (uptrend lasts) or LHs and LLs (reversal to downtrend)

It can not be stressed more that practice is the critical factor in identifying trends or judging when a market is drifting sideways, one needs to put in sufficient screen time. Trend analysis skills can be likened to riding a bike. It may seem a mystery until you "get it" but once you do you'll have a powerful tool, one that will significantly increase the chances of your trades succeeding.

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Source by Mark S Tan