Reading the chart 1 / 6
Reading the chart · Level 1Lesson 1 of 5

Trend and market structure: highs, lows and moving averages

"The trend is up" is not a feeling. It is a pattern of highs and lows you can check on any chart — and it always describes the past, a few candles late.

You will learn
  • What higher highs, higher lows, lower highs and lower lows are
  • Why a swing point is only known a few candles later
  • What moving averages add, and why they turn late

Before you start: What a candle is (one bar of a price chart; see "candle" in the glossary).

A trend is a pattern of highs and lows

Price never moves in a straight line. It rises, pulls back, rises again. The turning points are swing points: a swing high where a rise turned down, a swing low where a fall turned up.

Compare each swing with the one before it of the same kind:

  • Uptrend — higher highs and higher lows (HH, HL): each rise goes further, each pullback ends higher.
  • Downtrend — lower highs and lower lows (LH, LL).
  • Neither — the highs and the lows point different ways, or there is no clear sequence at all.

This definition needs no indicator: only the chart.

A swing is known only later

To mark swings by a rule rather than by eye, the terminal uses this one: a candle is a swing high when its high is above the highs of the five candles on each side (and a swing low the same way, with lows). The catch is the right-hand side: you only know a candle was a swing high after five more candles have failed to go above it.

The rule is a choice. On the daily chart below, from 20 September 2025 to 25 January 2026, two candles on each side find 31 swing points, five find 16, and ten find 7. More candles on each side: fewer swings, and later confirmation.

Structure — BTC daily, 20 September 2025 to 25 January 2026. The all-time high of 126,200 on 6 October 2025 counted as a swing high only on 11 October. On 10 October price fell to 102,000, below the last swing low of 108,620. Then lower highs and lower lows: 116,400 on 27 October, 98,944 on 4 November, 107,500 on 11 November and 80,600 on 21 November, −36.1% from the top. Price first closed below the 50-day EMA on 10 October, 4 days after the top and 10.6% below it. In January the swings turned up — 94,789, then 97,924 on 14 January — and on 6 February 2026 BTC traded at 60,000.

Moving averages: smooth, and late

A moving average replaces each candle's close with an average of recent closes, so the line is calmer than the price. The exponential moving average (EMA) gives the newest closes the most weight: each day's EMA = close × k + yesterday's EMA × (1 − k), with k = 2 ÷ (days + 1). The terminal draws the 20-, 50-, 100- and 200-candle EMAs.

Smoothing has a price: the average turns only after price already has. In the explainer, price closed below the 50-day EMA four days after the top, already 10.6% lower — and on 26 October it closed back above for two days before falling further. In a market that goes sideways, price crosses its averages again and again; between 5 and 20 January 2026 its close crossed the 50-day EMA four times.

Check yourself · 1 of 3The last two swing highs are 94,000 and 97,000; the last two swing lows are 88,000 and 86,000. What does the structure show?
Show the answer

An uptrend needs higher highs and higher lows; a downtrend lower highs and lower lows. Here the two point different ways.

Check yourself · 2 of 3With "five candles on each side", when is a swing high confirmed?
Show the answer

The rule looks at the candles after the high too, so the swing is known only once five more candles have all made lower highs.

Check yourself · 3 of 3Why does a moving average turn after price does?
Show the answer

Every average is built from past prices. The smoother the line, the later it turns.

Takeaways
  1. Uptrend: higher highs and higher lows; downtrend: lower highs and lower lows.
  2. A swing point is confirmed only after the candles that follow it — always late.
  3. How many swings you see depends on the rule; the terminal uses five candles on each side.
  4. Moving averages smooth price and turn late; sideways markets cross them again and again.
  5. Structure describes the past, not the next move.

Open BTC in the terminal — the trend reading is on the chart, the EMAs under the line-chart button above it

Further reading

Education only, not financial advice · Updated 28 Oct 2026 · Data: Binance · Report a mistake