From the perspective of technical analysis, there are 3 broad trends that really matter and go into fine tuning your trading and investment strategy. Broadly trends can be upward, downward or sideways. Let us look at these trends in greater detail.

Firstly, an uptrend is made up of ascending peaks and troughs. When a stock or an index makes higher highs and higher lows, it is a clear affirmation of an upward trend. When the trend is upward, you typically use it to keep a broadly positive outlook on the stock; even through you may play the stock or index on the downside for short term trades. The most common approach in such markets will be (buy on dips) to make the best of the broad underlying trend and the market volatility.

Secondly, a technical downtrend is made up of descending peaks and descending troughs. When a stock or an index makes lower highs and lower lows, it is a clear affirmation of a downward trend. When the trend is downward, you typically use it to keep a broadly bearish outlook on the stock; even through you may play the stock or index on the upside for short term trades. The most common approach in such markets will be selling on rises to make the best of the broad underlying trend and the market volatility.

Thirdly, a sideways trend is made up of flat peaks and flat troughs. When a stock or an index makes flat highs and flat lows, it is a clear affirmation of a sideways trend. When the trend is sideways, you typically interpret as lack of direction or the consolidation sideways before a clear trend emerges. For F&O traders the sideways trend is considered the most apposite time to do short term reverse strangles and straddles as the price risk is quite low. The most common approach in such markets will be to play for the lack of volatility via straddles and strangles.