Swings
Price moves in waves. A swing high is a peak with lower highs on either side; a swing low is a trough with higher lows on either side. Everything about trend is a statement about the sequence of those swings.
The three states
- Uptrend — each swing high is higher than the last, and each swing low is higher than the last. Higher highs, higher lows.
- Downtrend — lower highs, lower lows.
- Range — highs and lows form at roughly the same levels. No trend; support and resistance dominate.
Pullbacks are part of the trend
In an uptrend the moves down are pullbacks — the market taking a breath before the next higher high. The pullback is where trend traders look to buy: at a prior swing, at a level, at a moving average. Buying the breakout to a new high is possible, but the pullback offers a tighter stop and a better ratio.
When the trend is in question
The first warning is a swing that fails to extend: an uptrend whose latest high is not higher than the previous one. The confirmation is a swing low broken — the market makes a lower low. That is a change of structure, and it is the earliest objective signal that the trend has ended.
Summary
A trend is a sequence of higher highs and higher lows (or the reverse); a range is neither. Trade pullbacks in the direction of the trend, and treat a broken swing low as the trend's first real failure.