If you have studied technical analysis in some form (as most of us have), you have probably heard the phrase “the trend is your friend.” But have you really thought about what that means? It may be fun to say it, but it also truly can help you as a trader.

No matter what you trade, you should always be looking for an edge. Being successful encompasses more than just giving yourself better odds, although it is a good start. Looking for opportunities and being patient are imperative too.

Uptrend

To me an uptrend is an underlying (like stock) that is setting higher highs and higher lows. I consider these highs and lows to be pivot levels. I tell traders in my Group Coaching class to be patient and look for bullish opportunities within the uptrend. I like to see pullbacks (buy setups) or pullbacks to support areas and look for reversals. A higher high that correlates with resistance, I automatically look for two-bar bullish closes above that resistance level to confirm a break of resistance. Of course, there is no guarantee any of these setups will work, but to me I am putting the odds on my side.

Downtrend

On the flip side, an underlying that is setting lower lows and lower highs can be classified as a downtrend. Look for bearish opportunities within the downtrend. I like to watch for rallies (sell setups) or rallies into resistance areas and look for reversals. A lower low that correlates with support, I look for two-bar bearish closes below that support level to put the odds on my side that the underlying will continue to move lower or at least not higher. Once again, it is not a guarantee.

Bottom Line

The bottom line is to trade with the trend, be patient and put the odds on your side as much as you can. When an uptrend or downtrend is broken, it doesn’t mean you take an opposite direction trade immediately. It means you should consider not staying with the trend anymore. If you do this on a regular basis, it can only improve your odds of being successful and profitable.

John Kmiecik, Market Taker Mentoring