Post of the Day: Uptrends in Downtrends

[B]Student’s Question:[/B]

I just cannot visualize how a downtrend can have uptrends in it…or downtrends in an uptrend for that matter. It does not make sense to me.


<b style="">Power Course Instructor’s Response:

Believe me, you are not alone in that…

Have you ever heard the expression, “you may have to take 3 steps backwards before you can take 5 steps forward”? In the overall scheme of things, following that plan, you will be making forward progress even though at times you will be going backward. This is the same relative premise as downtrends having uptrends in them…and vice versa.

Take a look at the chart below for a visual…

The overriding trend on this 4 hour chart, for example, is represented by the red downtrend line. Within that trend there are numerous black lines that represent uptrends (moves [U]against[/U] the dominant trend) but, nevertheless, the downtrend prevails.

This is also an example of why we can oftentimes look at a shorter time frame chart and see a different trend or “look” than we do on a longer time frame chart. Ultimately, it is the longer time frame chart that represents the direction that will provide trades with a greater probability of success.