Trends, Trendlines, and Market Structure

6.1 Swimming with the current

"There's an old saying among traders," Hash told Mint. "The trend is your friend, until it ends."

Mint had been trying to catch the bottom every time a token fell, buying dips that kept dipping. "So I should stop guessing where it turns around?"

"Most of the time, yes," said Hash. "It's much easier to swim with the current than against it. This chapter is about recognising which way the current is flowing, and noticing when it changes."

6.2 What a trend is

Markets don't move in straight lines. Even strong trends zigzag. What defines a trend is the pattern of swing highs (peaks) and swing lows (troughs).

Trend	Pattern
Uptrend	Higher highs and higher lows
Downtrend	Lower highs and lower lows
Range (sideways)	Highs and lows roughly at the same levels

Here's an uptrend in numbers:

Swing	Price	Compared with previous
Low 1	$80,000
High 1	$90,000
Low 2	$85,000	Higher low
High 2	$96,000	Higher high
Low 3	$91,000	Higher low
High 3	$103,000	Higher high

Each pullback ends above the previous low, and each rally goes beyond the previous high. That's an uptrend.

Analysing trends through swing highs and lows is often called reading market structure.

6.3 Ranges

Markets spend a lot of time in ranges, moving sideways between support and resistance. In crypto, long ranges often follow big trends, as the market digests the move.

Ranges matter because many trend tools fail inside them. A strategy that works beautifully in trends can lose repeatedly in a choppy range, and vice versa. Identifying whether the market is trending or ranging is one of the most valuable skills in technical analysis.

6.4 Trendlines

A trendline connects swing points to visualise a trend.

In an uptrend, draw a line connecting two or more higher lows. It acts as rising support.

In a downtrend, draw a line connecting two or more lower highs. It acts as falling resistance.

Guidelines for drawing trendlines:

1. You need at least two points to draw a line, and a third touch to confirm it's meaningful.
2. Use candle bodies or wicks consistently. Different choices give different lines.
3. Use log scale for long-term trendlines (Chapter 2), since a trendline can look very different on log and linear charts.
4. Steeper trendlines break more easily. Very steep trends are usually unsustainable.
5. Don't force lines. If you have to ignore half the candles to make it fit, it isn't a valid trendline.

"Can't I just draw any line I like?" asked Node.

"You can, and many people do," said Hash. "That's why trendlines are among the most subjective tools in technical analysis. Two traders can draw different lines on the same chart. Use them as a guide, not a fact."

6.5 Channels

When you draw a trendline and then a parallel line on the other side of price, touching the opposite swing points, you get a channel.

An ascending channel has rising support and resistance. A descending channel has falling ones. Traders sometimes buy near the lower line and take profits near the upper line, as long as the channel holds. A breakout from a channel can signal acceleration or a change in trend.

6.6 When a trend changes

Trends end. Recognising the change early, without overreacting to normal pullbacks, is difficult. Market structure helps.

A break of structure happens when the trend's pattern is violated. In an uptrend, that's when price makes a lower low, falling below the most recent higher low.

Using the example above, the most recent higher low was $91,000. If the price falls to $88,000, it has broken the uptrend's structure.

Swing	Price	Signal
High 3	$103,000	Last higher high
Low 4	$88,000	Below previous low of $91,000: break of structure
High 4	$97,000	Lower high than $103,000: possible new downtrend

A single lower low is a warning. A lower low followed by a lower high is stronger evidence that the uptrend has ended and a downtrend may be starting.

A broken trendline is a weaker signal than a broken market structure. Trendlines often break while the trend continues more slowly, just at a different angle.

Chapter 6 · Trends and market structure

A rising series of higher highs and higher lows defines an uptrend. The trend remains intact while that pattern holds. When price fails to make a higher low and instead prints a lower low, it marks a break of structure, signalling a possible trend change.

6.7 Pullbacks versus reversals

Mint asked the question every trader faces. "When the price falls in an uptrend, how do I know if it's a normal pullback or the end of the trend?"

"You don't know for sure," said Hash. "But you can look at the evidence."

Evidence	Suggests a pullback	Suggests a reversal
Market structure	Stays above the previous higher low	Breaks below the previous higher low
Volume	Lower volume on the decline	Higher volume on the decline
Speed	Gradual decline	Sharp, aggressive selling
Key levels	Bounces at support or a rising moving average	Breaks through support
Higher timeframe	Higher timeframe trend still intact	Higher timeframe structure also breaking

6.8 Trading with the trend

A simple trend-following approach:

1. Identify the trend on a higher timeframe, such as the daily chart.
2. In an uptrend, look for buying opportunities during pullbacks to support, a trendline, or a moving average.
3. Place a stop-loss below the most recent higher low, where the trend structure would break.
4. Target the previous high or the next resistance zone.
5. Avoid trading against the higher timeframe trend unless you have strong evidence.

6.9 Crypto trends

Crypto trends can be extremely powerful, both up and down, because of narratives, leverage, and crowd behaviour (Module 1, Chapter 13). Bull markets often see long runs of higher highs and higher lows with sharp, fast pullbacks. Bear markets often feature brutal rallies that trap buyers before the downtrend resumes.

Two practical lessons:

Don't fight strong trends. Trying to short a powerful uptrend or buy a collapsing token because it "looks cheap" is one of the most common ways to lose money.

Smaller tokens follow Bitcoin. In crypto, most tokens are strongly correlated with Bitcoin's direction. Checking Bitcoin's trend before trading anything else is a useful habit.

6.10 Try it yourself

On a daily Ethereum chart, mark the swing highs and lows for the last six months. Label each as higher or lower than the previous one. Identify periods of uptrend, downtrend, and range. Then find the exact candle where each trend's structure broke.

Draw one trendline and one channel, and note how many times price respected them.

Key takeaways from this chapter

1. Uptrends make higher highs and higher lows; downtrends make lower highs and lower lows; ranges move sideways.
2. Reading swing highs and lows is called analysing market structure.
3. Trendlines and channels visualise trends but are subjective. Don't force them.
4. A break of structure, such as a lower low in an uptrend, signals a possible trend change.
5. Volume, speed, key levels, and higher timeframes help distinguish pullbacks from reversals.
6. Trading with the trend, and placing stops where the structure would break, is a simple core approach.
7. In crypto, trends can be extreme, and most tokens follow Bitcoin's direction.