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Uptrend: higher highs and higher lows

InteractiveMark the higher lows yourselfClick the lows of the uptrend on the real chart: the page tells you whether they are swing points and whether they really rise.Try it →

An uptrend on a real stock: AMD, 2022-2023

Open in the chart
Core concept · higher highs and higher lows · swing points at a 12% threshold
Uptrend
AMD: sessions from to · adjusted prices
InteractiveSwing points: threshold
volumeperiod start 82.33low 1low 2low 3low 4low 5high 1high 2high 3high 4lower highbreak129.1955.9496.43Sep 1, 2022Dec 15, 2022Mar 31, 2023Jul 18, 2023Oct 27, 2023
Swing points15Higher lows5Lower highJuly 14, 2023Break of the lowAugust 17, 2023

In blue, the line joining the swing points. The 5 higher lows and 4 higher highs are numbered; in red, the lower high, the level of the last low and the close that breaks it. Change the threshold and see how many points remain.

InteractiveRead a session. Click a day on the chart: I tell you which trend could be read that day, using only the swing points already confirmed.

5higher lows in 10 monthsfrom to the close below the last low, on

What an uptrend is made of

Fig. 1 · Higher highs and higher lows

high 1high 2high 3low 1low 2low 3low 4higher highs: each one tops the lasthigher lows: each one holds above the last
  • Each high tops the previous high.
  • Each low holds above the previous low.
  • Advances are longer than pullbacks: the price gains ground in steps.
  • It takes at least two highs and two lows, each higher than the one before, to call it an uptrend.

The three directions: up, down, sideways

Fig. 2 · The downtrend

lower highslower lowsbounce
  • The mirror image of an uptrend: lower highs and lower lows.
  • Each bounce stalls below the previous high.
  • Each decline takes the price below the previous low.

Fig. 3 · The sideways range

highs stall at the same levellows hold at the same level
  • Highs and lows stay on the same plane.
  • Buyers and sellers are in balance: neither side prevails.
  • It is not an anomaly: markets spend a sizeable part of the time moving sideways.

Swing points and the three trends by duration

Fig. 4 · How a swing point is found

+10%swing highswing lowconfirmed herepause: too small to count
  • A swing low is the lowest point between two advances; a swing high is the opposite.
  • It counts once the price has moved away from it by a chosen amount: in the figure, 10%.
  • You only know it afterwards, once confirmed: never on the day it forms.
  • A small threshold gives many swing points; a large one, few.

Fig. 5 · Three trends, one inside the other

primarysecondaryminor
  • Primary: one to several years.
  • Secondary: corrects the primary trend for weeks or months.
  • Minor: a few days, inside the secondary trend.
  • The same chart can be rising long term and falling short term: always say which duration you mean.

The classification by duration comes from Dow theory, where each trend has its own name and role.

When an uptrend ends

Fig. 6 · A lower high, then below the prior low

1 · last higher highprior low2 · lower high3 · close below the prior low
  • First warning: the price rallies but fails to top the last high.
  • Confirmation: a close below the last higher low.
  • From there highs and lows are no longer rising: the definition of an uptrend is no longer met.
  • As long as the prior low holds, a decline is only a pullback.

Fig. 7 · The break without warning

new highprior lowbelow the prior low
  • The price makes a new high, then falls straight through the prior low.
  • There is no lower high first: the sequence of higher lows is broken all the same.
  • Many wait for a lower high and a lower low before calling it a downtrend.

Fig. 8 · The trend and the trendline

trendlinehigher lows
  • A rising trendline is the straight line joining the higher lows: it draws the trend.
  • Its break is an early warning; the break of the prior low is what ends the sequence.
  • The two readings work together: one looks at the slope, the other at the steps.

How to draw it, how many touches it takes and when it is really broken: see the lesson on the trendline.

How to read a trend, step by step

the examples are those of AMD, above

1Mark the swing points

  • choose a threshold and keep it fixed
  • a point only counts once it is confirmed

AMD: 12% threshold, 15 swing points

2Compare the lows

  • each low with the one before, never with the first
  • rising: buyers step in at higher and higher prices

$54.57 → $60.05 → $75.92 → $81.02 → $107.08

3Compare the highs

  • a high that tops the previous one confirms the step
  • highs and lows must move in the same direction

$79.23 → $88.94 → $102.43 → $132.83

4State the duration

  • primary, secondary or minor: change the threshold and the reading changes
  • a short-term pullback does not contradict a long-term uptrend

here: an uptrend of 10 months

5Mark the level that ends it

  • it is the last higher low
  • a close below that level breaks the sequence

$107.08, the low of : broken on

Deeper dives: the trendline · Dow theory · support and resistance.

Interactive exerciseYour turn: mark the higher lows

AMD, the same sessions, with no marks: the judge uses the rules on this page
  1. Click the low where the uptrend starts: the point snaps to the nearest low on its own.
  2. Click the other lows, one after another: each higher than the one before. There are 5 in all.
  3. Press Done and read the verdict: swing points, higher lows, how many you found.
Click here on the chart: pick the first low

No point yet: move the mouse over the chart, the dashed circle shows the low that will be snapped to.

“The trend is your friend”: what it means

A saying, not a rule

  • one of the oldest sayings among traders
  • it sums up a tenet of Dow theory: a trend is assumed to be in effect until it gives clear signals of reversal

What it describes

  • in an uptrend the advances are larger than the pullbacks
  • chart readers start from the underlying direction, then look at the rest
?

What it does not say

  • it does not say how long the trend will last, or where it will end
  • it is not a promise: every trend ends sooner or later, as in figures 6 and 7

Where to go from here

The basics

The other lessons in the «The basics» section

What is technical analysis

  • the study of price and volume to recognise the trend and the levels
  • three premises: price discounts everything, trends, history repeats
  • exercise: uptrend, downtrend or sideways on three real charts

Candlestick chart

  • the four prices of a session: body and shadows
  • green and red, long and short bodies, long shadows, the doji
  • find the candle on a real chart: the judge says yes or no with the numbers

Support and resistance

  • the level where the decline stopped, and the one where the rise stopped
  • touches, time and volume: how much a level counts; once broken, it switches roles
  • find the level yourself on a real chart: the judge counts the touches

Trendline

  • the line through rising lows: two points and the third touch
  • the break with the 3% filter, the fan, the channel
  • where the line runs, day by day
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Frequently asked questions

What is an uptrend?

A series of higher highs and higher lows: each high tops the previous one and each low holds above the previous one. When highs and lows are falling the trend is down; when they stay at the same level the market is moving sideways.

How do you identify an uptrend on a chart?

Mark the swing points, that is the highs and lows the price has moved away from by a chosen amount, and compare each one with the one before. You need at least two highs and two lows, each higher than the last. A trendline joining the lows helps you see it.

When does an uptrend end?

The first warning is a lower high; the confirmation is a close below the last higher low. From there highs and lows are no longer rising, and the definition is no longer met. As long as that low holds, a decline is a pullback.

What does “the trend is your friend” mean?

It is an old traders’ saying. It echoes a tenet of Dow theory: a trend is assumed to be in effect until it gives clear signals that it has reversed. It describes a way of reading the chart; it does not say how long the trend will last, and it is not a promise.

Method and sources

The sources of this page: the books are cited, the text is ours
Source
John J. Murphy, Technical Analysis of the Financial Markets: chapter 4, basic concepts of trend (the definition of trend, the three directions, the three classifications by duration).
John J. Murphy, Technical Analysis of the Financial Markets: chapter 2, Dow theory (the three trends; a trend is assumed to be in effect until it gives definite signals of reversal).
Robert D. Edwards, John Magee, W.H.C. Bassetti, Technical Analysis of Stock Trends: Dow theory and the primary, secondary and minor trends.

The AMD example uses sessions from our archive, adjusted for dividends and corporate actions. The swing points are found by a rule (the price moves away from them by at least 12%) and verified at every update. The numbered figures are diagrams drawn to explain, not prices. This guide explains how the tools work: it does not contain investment recommendations and promises no returns. Our method · licence · report an error.