We all keep hearing the "trend is your friend" or "follow the trend" etc but what is a trend?
A trend is the persistence of a stock to move in a particular direction (up or down) over extended periods of time.
Since TA principles are independent of time, different trends can co-exist simultaneously over different time frames. For eg., it is common for weekly trend to up and daily trend to be down. Ditto for intraday charts.
A trend should always be treated as intact until there is a clear signal that the opposite trend has started.
A bull trend is a series of higher highs and higher lows. The start of an up trend is signaled when price makes a higher low (trough), followed by a rally above the previous high (peak). The end is signaled formation of a lower high (peak), followed by a close below the previous low (trough).
The peaks (HH) are also called as swing high and trough (HL) as swing low.
A bear trend is a series of lower highs and lower lows. The start of a down trend is signaled when price makes a lower high (peak), followed by a break of the previous low (trough). The end is signaled formation of a higher low (trough), followed by a close above the previous high (peak).
The LH is swing high and LL is swing low.
Example of trends
I have given examples using line charts... these are visually very easy to understand. For trading purposes, one should use a combination of line charts and candlesticks as the latter have the advantage of giving early signals.
The horizontal lines refer to applicable swing highs/ lows... these can be used as breakout levels or stoplosses.
Sample stock -5 min charts
Same stock - hourly charts
Same stock - daily charts