One of the basic techniques to recognize a trend is peak and trough sequence or top and bottom progress. There are many other trend identification methods and indicators as well.
Some of these are doing well, but most don’t. For example, using moving averages to identify a trend is widely in use but it’s not as effective as it should be. Many other such methods are there which won’t work as efficiently as peak and trough sequence.
In a rush to use advanced trend identification methods, the simple and most basic technique of trend analysis is often overlooked.
One of these is peak and trough progression. This concept is very simple, a rising trend typically consists of a series of rising tops and rising bottoms.
You already know it as, Higher High – Higher Low as an uptrend, and Lower High – Lower Low as a downtrend.
Each top is higher than its previous top, and each bottom is higher than its previous bottoms in an uptrend. In a downtrend, each top is lower than its previous top, and each bottom is lower than its previous bottom.
When the series of rising or falling top and bottom is interrupted, a trend reversal is signaled.