Post-Class Summary | Determining the Trend—The First Step in Trading

Dear fellow crypto traders, that's all for today's lesson. Let's take a few minutes to quickly review the key points from today so everyone can digest and absorb them.

I. What Is Trend Determination?
Trend determination = opening the chart and looking at the “momentum” first, not the “price.”

Price is the number on the dashboard; the trend is the road ahead. Look up at the road before stepping on the gas. Wherever there are candlesticks—Bitcoin, Ethereum, U.S. stocks, gold, or crude oil—you can determine the trend.

II. Three Types of Trends, Recognized at a Glance
Trend Type Characteristics Strategy
Uptrend Higher highs + higher lows Only go long
Downtrend Lower highs + lower lows Only go short
Ranging trend Horizontal highs + horizontal lows Do not trade
Do not place trend-following trades in a range—this is the bottom line.

III. Three Ways to Determine the Trend
First method: High-Low Point Identification (Trend Identification with Naked Candlesticks)
Open the candlestick chart and zoom out until you can see the past few months of price action—moving toward the upper right means an uptrend, moving toward the lower right means a downtrend, and moving sideways means a range. Simple, intuitive, and without lag.

Second method: Single Moving Average Trend Determination (MA20/MA60)

MA20 determines the short-term direction: above the price and rising = bullish; below the price = bearish

MA60 determines the bull-bear boundary: above the price and rising = bull market; below the price = bear market

Golden crosses and death crosses are confirmation signals, not entry signals—wait for a pullback before taking action

Third method: Candlestick Strength Verification

Large bullish/bearish candles = strong momentum and a high probability of trend continuation

Bullish engulfing at a low level = strong reversal; bearish engulfing at a high level = strong reversal

Declining volume during a pullback + rising volume on a breakout = healthy trend and an acceleration signal

Combine all three: high-low points determine direction, moving averages determine the timeframe, and candlesticks determine strength.

IV. Three Steps During Trading
Check the higher timeframe (weekly/daily) → determine the direction

Check the medium timeframe (4-hour/1-hour) → identify structure, support, and resistance

Check the lower timeframe (15-minute/5-minute) → find entry points

The higher timeframe determines the direction, while the lower timeframe finds the entry point—the entry point only matters when the direction is correct.

V. Four Iron Rules of Trend-Following Trading
The direction must be correct: only go long in an uptrend, only go short in a downtrend, and rest during a range

Do not rush entry: wait for a pullback, do not chase highs, wait for confirmation, and do not jump in early

Never skip stop-losses: every trade must have a stop-loss; exit immediately after a breakout against your position, and do not hold through losses

Do not panic while holding: as long as the trend has not ended, do not let volatility scare you out

VI. Warning Signs That an Uptrend Is Ending
When the following signals appear, beware that the trend may reverse:

Price-volume divergence: price reaches a new high while trading volume contracts

Large bearish candle engulfing: one bearish candle covers multiple preceding bullish candles

Long upper wick: a shooting star at a high level

Moving average reversal: the short-term moving average flattens or turns downward

Indicator death cross: MACD or KDJ forms a death cross at a high level

VII. Remember One Sentence
Determining the trend is not predicting the future; it is understanding the present.

Candlesticks are not prediction tools; they are interpretation tools. Price is the result, while the trend is the cause. Do not guess the bottom or try to pick the top—just follow the trend.

If you consistently follow these principles, you will already have surpassed 80% of traders in the market.

🎯 Homework
Open the candlestick chart and use the “high-low point identification method” to determine the current trend

Compare MA20 and MA60 to see whether the moving average directions align with the trend

Review the market once a day this week and keep it up for one week

Preview of the next lesson: Trend Structure and Trading System Construction—integrating the trend determination methods into a complete system for entries, exits, adding to positions, and backtesting.

Wishing all fellow crypto traders successful trading. See you in the next lesson!