Before any indicator, you must know whether a market is trending at all. An uptrend prints higher highs and higher lows; a downtrend prints lower highs and lower lows; a range drifts sideways with no clear progression. Reading this from price first keeps your indicators honest.
The three market states
- Uptrend: successive higher highs and higher lows — buyers in control.
- Downtrend: successive lower highs and lower lows — sellers in control.
- Range: highs and lows stay roughly level — neither side in control.
The most common mistake is applying trend tools to a ranging market. Moving average crossovers, MACD and Supertrend all whipsaw badly when price chops sideways, firing signal after signal that reverses immediately. Recognising a range early tells you to stand aside or switch tactics.
Timeframe matters too. A market can be in an uptrend on the daily chart and a downtrend on the hourly. Decide which timeframe you trade, and let the higher timeframe set your directional bias so your indicator signals point the same way as the bigger picture.
Read the trend from price structure first — indicators work in trends and mislead in ranges, so knowing the state comes before any tool.