Reading a Trend: From Structure to Signal

A trend is a sequence of higher highs and higher lows until it is not. Defining structure first prevents you from arguing with the tape.

Key takeaways

• Mark the last three swing highs and lows before looking at any indicator.
• A trend is intact until a prior swing low breaks on a closing basis.
• Indicators confirm structure; they never replace it.

The 200-day average is a blunt instrument used badly by most retail traders. Used as a regime switch rather than a crossover signal, it removes the majority of catastrophic entries.

Key takeaways

• Above a rising 200-day: trade long bias, ignore short signals.
• Below a falling 200-day: rallies are counter-trend until proven otherwise.
• Flat 200-day means no regime — reduce size and wait.

RSI tells you how stretched price is, not where it is going. Rate of change tells you the direction and the speed. Use them together or not at all.

Key takeaways

• RSI above 70 is not a sell signal in a strong trend; it is a strength signal.
• Divergence matters only at extremes, and only with structure confirmation.
• Rate of change over 30 sessions is the most predictive single input in our model.

A weighted composite beats five indicators giving contradictory advice. Here is the exact weighting we use and why each component earns its place.

Key takeaways

• Short-term positioning, medium-term trend, long-term regime — one weight each.
• Momentum gets the largest single weight because it leads.
• Any score must come with an invalidation level, or it is just an opinion.