What Is an Uptrend?
In trading and investing, an uptrend is a period of sustained price increases. It is characterized by a period of successive higher highs and higher lows. The uptrend is active as long as price does not begin making lower highs and lower lows.
As you probably know, there are two basic types of trending price action, uptrends and downtrends.
In essence, a trend is a duration of time in which price moves in one general direction. Given that price can only ever go one of two directions—upward or downward—assets tend to remain in longer-term uptrends or downtrends most of the time.
However, this increase or decrease does not necessarily have to be continuous.
In fact, it usually is not.
How Uptrends Work
On a fundamental level, uptrends are quite simple.
They are created when buying pressure exceeds selling pressure over a prolonged time span. However, there are usually periods of downward price action within an uptrend. These are known as pullbacks. Likewise, there can also be periods of upward price action within a downtrend, otherwise known as rallies.
A simplified way to conceptualize this:
A bull market is to an uptrend what an uptrend is to a rally.
How you would delineate each of these is relative to the timescales you’re trading on (though bull markets and bear markets do have semi-standard definitions).
Furthermore, there may be periods where price remains relatively the same. This “sideways” price action is referred to as consolidation. During this phase, price usually remains range bound within a price band, oscillating between shorter-term support and resistance.
Such periods can last any amount of time and may contain within them any number of shorter-term downtrends or pullbacks. During an uptrend, consolidation periods that resolve to the upside are considered bullish continuations and ones that resolve to the downside are considered bearish reversals.
One of the key skills of traders is the ability to understand which of these phases the market is in.