There's a phrase so overused in the trading world that it's become a cliché: "the trend is your friend". And even though it sounds like a fortune cookie, it holds one of the most sensible ideas out there. Before making any decision about a chart, the first thing is to know where the price is heading. Because going against the current is tiring, it hurts and, with money on the line, it gets expensive. Let's learn to read that current.
A trend is, quite simply, the general direction in which the price moves over a stretch of time. Watch out for that word "general": price never moves in a straight line. It goes up and down all the time, like a ball bouncing down a staircase. Even if it bounces back up on each step, if overall it's heading down, the trend is down. What matters is the direction of the whole, not each little bounce.
Here's the trick that changes everything. Look at the peaks (the high points, the highs) and at the troughs (the low points, the lows) that the price leaves behind. Comparing one with another tells you the trend without any fancy tool:
That's all. You need nothing more to classify any chart. Let's put a name to the three possible cases.
An uptrend is a succession of higher highs and higher lows. That is: every time the price rises, it reaches higher than the time before; and every time it corrects downward, it stops before touching the floor of the previous dip. A staircase going up. Here the buyers are in charge. It's the most comfortable ground for anyone looking to buy low and sell higher.
A downtrend is the opposite: lower highs and lower lows. Each bounce upward falls shorter than the last, and each drop reaches further down. A staircase going down. Here the sellers are in charge. The classic beginner's mistake is to insist on buying "because it's already cheap": in a downtrend, what's cheap almost always gets cheaper still.
The third case is the most ignored and the one that loses the most money: the sideways range. Here the price doesn't rise or fall clearly, it moves sideways within a band, bouncing between a floor and a ceiling over and over again. There's no trend. Neither buyers nor sellers are in charge; they're tied.
Those floor and ceiling bands are exactly the support and resistance you may already have heard about. In a range, following a "trend" that doesn't exist is the perfect recipe to enter late and get burned on the way out.
The phrase doesn't mean you win for sure by following the trend. Nothing guarantees a win, and trading always carries risk. What it means is that you have the odds more on your side when you go with the current than when you row against it. In an uptrend, looking for buying opportunities is swimming with the current; insisting on selling is swimming against it. You can be right against the current, sure, but it's harder and more exhausting.
Translated into something practical for the day-to-day:
To sharpen your reading it will help you a lot to know how to interpret Japanese candlesticks, which help you see the tug-of-war between buyers and sellers within each of those steps.