Up, Down or Sideways?

Step back from the single candles and look at the whole chart. It is always doing one of three things: going up, going down, or going nowhere. Telling which is the first thing every trader checks, every day.

New words in this class: trend and range.

Think of a staircase

Price never moves in a straight line. It goes up a bit, dips a bit, goes up again. So instead of looking at single candles, look at the peaks (where price turned down) and the dips (where price turned up):

• Going up: each dip stops higher than the last one, and each peak goes higher. A staircase climbing.
• Going down: each peak stops lower than the last one, and each dip goes lower. A staircase descending.
• Sideways: the peaks stop at about the same height, and so do the dips. Price is bouncing in a box.

A market going steadily up or down is in a trend. A market bouncing sideways is in a range.

Two simple tips

1. Zoom out first. The last few candles can point any way. The trend is what the whole chart is doing.
2. When in doubt, it’s sideways. If you have to squint to see a staircase, there isn’t one. Ranges are very common, and that’s fine: they have their own floors and ceilings, which is the next class.

Why it matters

Swimming with the current is easier than swimming against it. Most traders try to buy in markets going up and sell in markets going down, and they are more careful when price is going sideways. You’ll learn a lot more about trends in Identifying a Trend; for now, being able to say “up, down or sideways” puts you ahead of most beginners.

Want more? Practice rounds gives you ten real charts from the markets on this site, with a score to beat.

Remember

• Look at the peaks and dips, not single candles.
• Higher peaks and higher dips: up. Lower peaks and lower dips: down. Same peaks and dips: sideways.
• Steady up or down is a trend; sideways bouncing is a range.