What is the Trend Line
Before we get started, we have to determine what a trend is before we can trade it. A trend, to a trader, is based largely on the timeframe they are trading. As you have learned, the 2 most important timeframes, as far as I’m concerned, is the timeframe you are trading and the next higher timeframe.
For example, if you are trading the 1 hour timeframe, the important timeframes would be both the 1 hour and the 4 hour. The 1 hour is the timeframe you trade, the 4 hour becomes the timeframe that helps you decide if you are trading in the right direction. This relationship exists with both trend trading and counter trend trading.
When we look to find a trend, we will be looking at the timeframe we are trading and the next higher timeframe, but the focus will largely be on the timeframe we are trading.
A trend is a continuous move in the market either up or down. During a trend, the market will make small corrections (or pullbacks) along the way, giving you a zig zag look, but overall, the market is moving in one direction.
Below you see an artistic example of an uptrend. The overall direction is upwards as price moves from the lower left to the upper right. During the move there are small retracements against the trend, but overall, the direction is up.
Below is an example of a downtrend. Price moves from upper left to lower right, and even though there are small corrections along the way, the overall move is down.