Uptrend
An uptrend is generally characterized by a sequence of higher highs (HH) and higher lows (HL). Price peaks and troughs tend to move higher.
How Prices Move.
Prices do not move in a vacuum. Learn how supply, demand, liquidity, volatility, and sentiment shape market movements.
Understanding Supply and Demand
Demand describes buyers' willingness and ability to purchase an asset. Supply describes sellers' willingness and ability to offer an asset for sale.
Changes in the balance between supply and demand can influence prices. When buyers are willing to accept increasingly higher asking prices, transaction prices may rise. Dominant selling pressure can also push transactions toward lower prices.
KEY INSIGHT
Prices reflect actual transactions, not simply the number of people who appear bullish or bearish.
Uptrend, Downtrend, and Sideways
Downtrend
A downtrend is generally characterized by lower highs (LH) and lower lows (LL). Price peaks and troughs tend to move lower.
Sideways
A sideways market moves within a range without a clear trend. Price may repeatedly move between support and resistance areas.
STRUCTURE MATTERS
Market structure describes what price has been doing. It does not guarantee what price will do next.
Understanding Liquidity
Liquidity describes how easily an instrument can be traded without the transaction itself causing a substantial price change.
In relatively liquid conditions, transactions can generally be executed more easily near available market prices. When liquidity thins, spreads may widen and price movements may become sharper, especially around major news releases or session transitions.
PRACTICAL INSIGHT
A visible price does not guarantee that an order can be filled at exactly that price. Execution depends on available liquidity and trading conditions.
Understanding Volatility
Volatility describes the magnitude of price changes over a period. High volatility means prices are changing relatively substantially, while low volatility indicates comparatively smaller changes.
High volatility can create opportunities while also increasing risk. Stop-loss orders may experience slippage, spreads may widen, and oversized positions can accelerate losses.
RISK REMINDER
Bigger price movements do not automatically mean better opportunities. Position size and potential loss must remain under control.
Sentiment and Changes in Direction
Sentiment describes market participants' attitudes toward an asset's conditions or outlook. It can change in response to economic data, central-bank policy, news, and changing expectations.
A breakout occurs when price moves outside an area that previously contained its movement. However, not every breakout continues. Price can return inside the previous range, so confirmation and risk management remain important.
THE DESK PRINCIPLE
Do not judge a market move from a single candle. Consider structure, context, and risk before drawing a conclusion.
Test Your Understanding
Answer all five questions. The passing score is 80%, or at least four correct answers.