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Market Regime Guide
Different market conditions favor different patterns. Learn which patterns work best in each regime.
Trending Up
Markets making higher highs and higher lows. Bullish momentum is dominant, and buyers control the tape. This is the easiest regime for trend-following strategies.
Key Characteristics
- Higher highs and higher lows on the daily chart
- Price above 20, 50, and 200 SMA
- RSI oscillating between 40-80 (not reaching oversold)
- Expanding volume on up-moves, contracting on pullbacks
- Bullish MACD above the signal line
Best Patterns for Trending Up
- +Bullish Flag / Pennant
- +Rising Three Methods
- +Bullish Engulfing (at pullback support)
- +Three White Soldiers
- +Ascending Triangle
- +Mat Hold
- +Order Block (Bullish)
- +Cup & Handle
- +Hammer at Moving Average
- +Gap and Go
Worst Patterns for Trending Up
- -Bear Trap (fading the trend)
- -Short-biased Wedge patterns
- -Evening Star (low reliability in uptrends)
- -Bearish Engulfing (often just a pullback)
- -Double Top (premature calls)
Trading Tips for Trending Up
- 1.Buy the dip -- pullbacks to support are buying opportunities
- 2.Continuation patterns have higher win rates than reversal patterns
- 3.Use trailing stops to let winners run
- 4.Scale into positions on pullbacks rather than chasing breakouts
- 5.Reversal patterns are more likely to fail in strong uptrends
How to Identify the Current Market Regime
Use this checklist before every trading session to determine which regime you are in.
Most traders lose money by applying the wrong strategy to the wrong regime. A trend-following strategy in a ranging market will get chopped up. A mean-reversion strategy in a trending market will fight the tide. Always identify the regime first, then select your patterns.