Especially in the longer term, there’s no such thing as a clear direction to a trend. Markets waver. They retrace and show successive highs and lows. Basically, if these show a GENERAL upward movement, we have an uptrend, and ice versa. The pullbacks we see usually mean people are taking profits and generally correcting back from exaggerated movements.

So, how do we trade a trend? Do we need to hope we’re at its beginning or end, or can we make smaller trades in between? For long-term investors, of course, riding the pullbacks is the way to go, but be careful not to be stopped out by a trailing stop-loss. Another thing we can do is open shorter trades, closing on the pullback and opening a new trade when that ends. But that requires constant attention, and, of course, each time we open a new position we’re stuck with the spread, so we’re not really taking full advantage of the market.

Luckily, though, the movements and the pullbacks form what we call channels. These may be fixed; they may narrow or widen as we go along. What you’ll usually find, though, is that the channel narrowing is a warning that the trend is ready to reverse.