Forex Trends & Trendlines
A trend is the general direction price is moving. Markets move in zig-zags, not straight lines, so we define a trend by its swing highs and swing lows. Learn to read them and you will always know which side of the market you should favour.
The Three Market Directions
Uptrend
Higher highs (HH) and higher lows (HL). Buyers are in control.
Downtrend
Lower highs (LH) and lower lows (LL). Sellers are in control.
Range (sideways)
Highs and lows at roughly the same levels. Neither side is winning. See Support & Resistance.
A swing high is a peak with lower highs on both sides of it. A swing low is a trough with higher lows on both sides of it.
Uptrends: Higher Highs and Higher Lows
In an uptrend, every rally pushes past the last peak (higher high) and every pullback stops above the last trough (higher low). The trend is intact as long as the most recent higher low holds.
Example
Swing lows in the chart: 1.0812 → 1.0831 → 1.0851 → 1.0872. Each is higher than the one before.
Swing highs: 1.0857 → 1.0881 → 1.0903. Each is higher too. This is a textbook uptrend.
Downtrends: Lower Highs and Lower Lows
A downtrend is the mirror image. Each bounce fails below the last peak, and each drop breaks the last trough.
Note: A trend is only "broken" when the structure breaks. In an uptrend that means price closes below the last higher low. One red candle does not end an uptrend. You will go deeper into this in Market Structure.
How to Draw a Trendline
A trendline is a straight line that connects swing points in a trend. It gives you a visual guide for where pullbacks may stop.
- Identify the trend first: up (HH/HL) or down (LH/LL).
- Uptrend: connect two or more swing lows. The line goes under price.
- Downtrend: connect two or more swing highs. The line goes above price.
- Do not cut through candle bodies. Wicks may poke through slightly; bodies should not.
- Extend the line to the right to see where the next touch may happen.
- Wait for a third touch. Two points draw a line; the third touch confirms other traders are watching it.
Example: Projecting a trendline
An uptrend line touches 1.0812 and, 20 candles later, 1.0872.
Slope = (1.0872 − 1.0812) ÷ 20 candles = 60 pips ÷ 20 = 3 pips per candle 4 candles later the line is at 1.0872 + (4 × 3 pips) = 1.0884
If price pulls back over the next 4 candles, watch for buyers around 1.0884.
Tip: Steep trendlines break fast. Lines at a moderate angle (roughly 30–45° on a normally scaled chart) tend to last longer. If a line is very steep, draw a second, flatter one under it.
Channels
A channel is two parallel lines with price moving between them. In an uptrend, draw the trendline under the lows, then copy it and place it on the highs.
- Trend traders buy near the lower line of a rising channel (with the trend).
- Some take profit near the upper line.
- A failure to reach the upper line is an early sign of weakness.
- A strong close outside the channel signals that the pace of the trend is changing.
Trend Strength
Not all trends are equal. Use these clues to judge how strong a trend is:
| Clue | Strong trend | Weak / tiring trend |
|---|---|---|
| Pullbacks | Short and shallow (e.g. to 23.6–38.2% Fibonacci) | Deep (61.8% or more) |
| Impulse candles | Large, closing near their extremes | Small, with long wicks against the trend |
| New highs/lows | Each push goes well beyond the last | New highs barely exceed old ones |
| Moving averages | Price stays on one side; MAs fanned out and sloping | Price crosses the MAs often; MAs flatten |
| RSI | Holds 40–80 in uptrends | Divergence against price |
"The Trend Is Your Friend"
This old saying means that trading with the trend usually gives better odds than fighting it. In an uptrend you look for buys on pullbacks; in a downtrend you look for sells on bounces.
With the trend
Buy pullbacks to the trendline, a higher low or a moving average. The market's momentum helps you.
Against the trend
Picking tops and bottoms. Can be very profitable when right, but you are wrong far more often.
The full saying is "the trend is your friend — until the end, when it bends." Trends do end, which is why you always need a stop loss.
Tip: Check the trend on a higher timeframe before trading a lower one. A 15-minute buy setup is stronger when the 4-hour chart is also in an uptrend. See Multi-Timeframe Analysis.
Trendline Breaks
When price closes clearly through a trendline, the trend is weakening — but not always reversing. Often the broken line then acts like resistance (in an old uptrend), just like a flipped level.
- Break — a candle closes clearly through the trendline.
- Structure — confirm with price structure: has the last higher low been broken?
- Retest — price often returns to the broken line from the other side.
- Decide — a rejection at the retest is a lower-risk entry in the new direction.
Warning: Trendlines are subjective. Two traders can draw different lines on the same chart. Treat a trendline break as one piece of evidence, not a trading system on its own.
Test Yourself With Exercises
Which sequence describes an uptrend?
- Lower highs and lower lows
- Higher highs and higher lows
- Equal highs and equal lows
In a downtrend, where do you draw the trendline?
- Under the swing lows
- Through the middle of the candles
- Across the swing highs
A rising trendline touches 1.2650 and, 10 candles later, 1.2700. Where will it be 6 candles after the second touch?
- 1.2730
- 1.2760
- 1.2706
- 1.2715
What does a channel consist of?
- A trendline and a moving average
- Two horizontal lines
- Three trendlines meeting at a point
- A trendline and a parallel line on the other side of price
Which is a sign of a strong uptrend?
- Deep pullbacks to the 78.6% level
- Shallow pullbacks and new highs well beyond old highs
- Price crossing the moving average every few candles