Now that we understand the concept of what a trend is, let’s take it one step further, shall we?
Remember that “uptrend” is defined as the direction of successive higher tops and higher bottoms and looks like a zigzag on the price chart? Great!
Now the question is, what is the minimum number of tops and bottoms needed to define an uptrend?
Well, the answer comes from Charles Dow himself: two successively higher tops and two successively higher bottoms.
So, similarly to Newton’s First Law of Motion, an object in motion will continue to move in the same direction until there is an opposing force acting upon it. Therefore, an uptrend will continue to move higher and higher until it reverses.
Is it guaranteed 100% that an uptrend will continue to move higher and higher?
Eh, not really. But it’s more likely to move higher than to reverse.
So, what is the more sensible thing to do during an uptrend?
If you thought of “buy”, then we’re with you!
Since the uptrend will most likely continue to move higher, a “sell” move wouldn’t be the wisest thing to do.
Ready to move on to the downtrend? Let’s go!
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