The Trend
The Trend
The trend is directional movement of prices and it plays an important role in vast majority of technical trading systems. Technical analysis differentiates between trending markets and non-trending markets, also called flat trending markets. Trending markets can be either moving upwards and downwards. Upward moving market is called bull market, while downward moving market is called bear market. Market is generally considered to be in uptrend when price reaches higher peaks and higher troughs. On the contrary, market is regarded to be in downtrend when price reaches lower troughs and lower peaks. Non-trending market occurs when there is no significant uptrend or downtrend and price moves within certain range. Thus, flat trending market is notorious for its sideways moving price action.
Trend Clasiffication
Generally, trends tend to be of different lenghts. According to these lenghts, trends fall into four main categories: primary trend, secondary trend, minor trend and intraday trend. Primary trend is only inviolate trend and it lasts for long period of time, usually for months or years. Secondary trend runs counter to the primary trend and is often measured in weeks or months. Further, minor trend is measured in days, while intraday trend is represented merely by daily fluctuations in price.
The Primary Trend
The primary trend can be subdivided into three distinctive phases. The first phase of the primary bull trend begins by revival of investor's confidence from the prior primary bear market. This is then followed by second phase in which asset prices increase as response to increased corporate earnings. Then finally, the third phase arises when speculation becomes dominant force driving markets higher. This phase, when asset prices are rising on hopes, dreams and expectations of individual investors tends to foreshadow beginning of the first phase of primary bear trend. This primary bear trend commences with abandonment of hopes and dreams upon which investments were made. This is subsequently followed by selling pressure due to decreased corporate earnings in the second phase, which later escalates into panic selling in the third phase.
The Secondary Trend
The secondary trend is intermediate-term trend. Its direction is opposite to the primary trend and it represents any significant price drop in the primary bull market or price rise in the primary bear market. The secondary trend usually lasts for weeks or months. Its measure in the percentage terms tends to range between 33% and 66% of range of the primary trend. This trend is considered to be prone to market manipulation as opposed to the primary trend.
The Minor and Intraday Trend
The minor trend lasts for few days or weeks, but always less than the secondary trend. It is difficultly identifiable than previous types of trends since its amplitude in the percentage terms is significantly less compared to the primary and secondary trend. Same applies to the intraday trend that lasts for few seconds up to the several hours. It represents daily changes in price action and is regarded to have least of predictive value.
The trend is directional movement of prices and it plays an important role in vast majority of technical trading systems. Technical analysis differentiates between trending markets and non-trending markets, also called flat trending markets. Trending markets can be either moving upwards and downwards. Upward moving market is called bull market, while downward moving market is called bear market. Market is generally considered to be in uptrend when price reaches higher peaks and higher troughs. On the contrary, market is regarded to be in downtrend when price reaches lower troughs and lower peaks. Non-trending market occurs when there is no significant uptrend or downtrend and price moves within certain range. Thus, flat trending market is notorious for its sideways moving price action.
Trend Clasiffication
Generally, trends tend to be of different lenghts. According to these lenghts, trends fall into four main categories: primary trend, secondary trend, minor trend and intraday trend. Primary trend is only inviolate trend and it lasts for long period of time, usually for months or years. Secondary trend runs counter to the primary trend and is often measured in weeks or months. Further, minor trend is measured in days, while intraday trend is represented merely by daily fluctuations in price.
The Primary Trend
The primary trend can be subdivided into three distinctive phases. The first phase of the primary bull trend begins by revival of investor's confidence from the prior primary bear market. This is then followed by second phase in which asset prices increase as response to increased corporate earnings. Then finally, the third phase arises when speculation becomes dominant force driving markets higher. This phase, when asset prices are rising on hopes, dreams and expectations of individual investors tends to foreshadow beginning of the first phase of primary bear trend. This primary bear trend commences with abandonment of hopes and dreams upon which investments were made. This is subsequently followed by selling pressure due to decreased corporate earnings in the second phase, which later escalates into panic selling in the third phase.
The Secondary Trend
The secondary trend is intermediate-term trend. Its direction is opposite to the primary trend and it represents any significant price drop in the primary bull market or price rise in the primary bear market. The secondary trend usually lasts for weeks or months. Its measure in the percentage terms tends to range between 33% and 66% of range of the primary trend. This trend is considered to be prone to market manipulation as opposed to the primary trend.
The Minor and Intraday Trend
The minor trend lasts for few days or weeks, but always less than the secondary trend. It is difficultly identifiable than previous types of trends since its amplitude in the percentage terms is significantly less compared to the primary and secondary trend. Same applies to the intraday trend that lasts for few seconds up to the several hours. It represents daily changes in price action and is regarded to have least of predictive value.
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