Learn · Chapter 06 of 09
Trend analysis
Trend is the only edge that survives transaction costs for most retail traders. This chapter teaches objective trend definition, support/resistance mapping, and trendline discipline — the three skills every later chapter assumes.
Start here · 4 lessons · 13 min read
Key takeaways
- Trade with the daily trend; use lower timeframes only for timing.
- Zones, not lines — give levels a 1–2% buffer on large-caps.
- A broken level retested is more tradeable than the first break.
Lesson 1
Defining trend objectively
- Uptrend = higher highs + higher lows; downtrend mirrors; anything else is a range.
- Two points draw a line, three confirm it — never trade off a two-touch trendline alone.
- Price above a rising 50-DMA + rising structure = objective uptrend on daily charts.
Lesson 2
Support and resistance mapping
- Mark prior swing highs/lows, gaps, round numbers and volume nodes — clusters are zones, not lines.
- Older + more-touched + higher-volume levels matter most.
- Broken resistance becomes support (polarity) — backtests of the flip are prime entries.
Lesson 3
Trendlines and channels
- Connect wicks in strong trends, bodies in weak ones — be consistent per chart.
- Parallel channels contain healthy trends; repeated channel-midline respect confirms rhythm.
- Steep trendlines (>60°) break fast — use them for trailing, not entries.
Lesson 4
Breakouts, breakdowns and false moves
- True break: daily close beyond level + volume expansion + next-day hold.
- NSE false breaks cluster around events (RBI policy, results, expiry) — halve size there.
- Failed breakout back inside the range is itself a signal — flip bias, don't freeze.
Mistakes that cost money
- Counter-trend catching falling knives because 'support is near'.
- Drawing trendlines through bodies and wicks interchangeably to fit a bias.
- Buying every resistance break without checking Nifty's own trend.
Chapter FAQ
How many touches make a trendline valid?
Two draws it, three validates it, four-plus makes it crowded (expect a break soon). Trade the third touch; be cautious fading the fifth.
Support vs demand zone — same thing?
Roughly. Support is a level; a demand zone is a price band with prior turnover. Zones survive better on volatile mid- and small-caps.
Why do breakouts fail so often?
Because most 'breakouts' are mid-range noise or event-day spikes. Breaks of multi-week levels, with volume and Nifty tailwind, fail far less.
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