Technical Analysis

Peaks and Troughs

Analysing peaks and troughs is a very precise way of identifying trends however it can also be time consuming.

In order to identify peaks and troughs, you need to be able to identify short term trends using individual bar analysis.

A short term up trend exists when there are two consecutive days of higher highs and higher lows, as shown below.

A short term down trend is the exact opposite and exists when there is two consecutive days of lower highs and lower lows, as shown below.

Once you have identified the short term up and down trends, you can identify the medium term trends using peaks and troughs.

A peak is the highest point between a short term up trend and a short term down trend, as shown below.

A trough is the lowest point between a short term down trend and a short term up trend, as shown below.

The final step is identifying the different peaks and troughs along a chart. When a price exhibits successive higher peaks and higher troughs, it is in a medium term up trend, as shown below.

When a price exhibits successive lower peaks and lower troughs, it is in a medium term down trend, as shown below.