Trend and its types

The trend is the most important concept in a stock market. A trend is a general direction in which a stock price is headed, following the trend can be much more profitable for traders and investors. The trends can last for a long period of time or they can last for a short period of time as well, they can be classified in terms of their length. Most traders and investors consider trends as short-term, long-term, and medium/Intermediate terms.

Long-term trends occur over a timeframe of more than one year, medium/intermediate-term trends occur over a timeframe of one to two months, and short-term trends occur over a timeframe of less than one month.

Trends are not always easy to spot. Because price never moves in straight lines, price moves in a series of highs and lows over time. Spotting a trend, in the beginning, can be rewarding for traders. In technical analysis, it is the overall direction of these highs and lows that constitute a trend. An uptrend consists of higher highs and higher lows and a downtrend consists of lower highs and lower lows.

So following are some of the best ways to identify the trend :

• Historical charts

• By drawing a trendline

• Trend Indicators

• Moving Averages

But technically trends can be easily identified in a chart with the help of a trendline. A trendline is a simple charting technique, where a line is added to the chart to represent the trend of a specific security. Drawing a trendline is easy as drawing a straight line that connects higher lows in an uptrend and lower highs in a downtrend.

There are THREE types of trends:

• Uptrend

• Downtrend

• Horizontal Trend/Sideways market

UPTREND

In an uptrend, the price makes a series structure of Higher highs and Higher Lows. An uptrend shows that the market has a positive sentiment, so it is also known as a rising trend. An uptrend will be profitable to an investor if he has a long position in an uptrend. However, the uptrend can be determined by joining more than two Higher Lows in a chart with the help of a trendline. However, it is safe to make any buy decisions in an uptrend on Higher lows.

Higher lows are connected with the help of the trendline which acts as a support. So you can initiate a long position on Higher Low.

DOWNTREND

When the price of a stock is moving lower and forming Lower highs and Lower Lows, it is known as a downtrend. A downtrend shows that the market has a negative sentiment. so traders also make money in the falling/downtrend market by Short selling. In a downtrend, the price of an asset keeps falling successively. A downtrend can be determined by joining more than two lower highs with the help of a trendline.

Lower Highs and Lower Lows structures in a downtrend

Lower Highs are connected with the help of a trendline which acts as a resistance, so you can initiate the short trade near the lower high.

HORIZONTAL TREND / SIDEWAYS MARKET

A horizontal trend is also known as a sideways market which means the price of a stock/asset consolidates between a channel or in a specific price range for a while. A channel consists of two trendlines that act as support and resistance. In a sideways market price doesn't form any higher highs or lower lows, generally, the price gets rebounded from the previous highs or the previous lows, which means that the price gets resisted from the previous highs zone, and on a lower side price takes support from the previous low's zone, and by this way, the price gets locked in a range and this is what sideways market is.

Price Is getting Consolidating In a range

This is how the sideways market looks. However, you can initiate a long position at the support zone and a short position at the resistance zone.

So understanding the trend really supports the trade you initiate. If you trade properly in a trend direction, you will be profitable for sure.

Avoid trading against the trend, most of the time it leads your trade towards a losing trade. Always remember that "TREND IS YOUR FRIEND"

• Thank you •

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