Trend

Trend is a general direction of the market or certain financial instrument price. If the financial instrument’s price rises, it is called uptrend and if the price declines, that is called downtrend.

Depending on the length, trend could be short, medium or long term trend.

Generally, it is the best to trade with trends (“Trend is your friend”), meaning that if the general trend of the market is headed up, investor should be long and vice versa, if the general trend is headed down, investor should favor short position.

Also a trend can apply to financial instruments and any other market which is characterized by a long-term movement in price or volume.

Short, intermediate and long-term trends are the three kinds of trends that can be seen, each day, in the study of technical analysis. "A trend is your friend", is just one of the sayings that have come out of the study of “primary” as well as “secular” trends. Given the understanding that the psychology of the markets actually moves the markets, that psychology develops and ends the trends.

Learning how to identify the trend should be the first order of business for any student of technical analysis. Most investors, once invested in an uptrend, will stay there looking for any weakness in the ride up, which is the indicator needed to jump off and take the profit.

The “bull” and “bear” markets are also known as primary markets, and history has shown that the length of these markets generally last from one to three years in duration.

A “secular” trend, one that can last for one to three decades, holds within its parameters many primary trends, and, for the most part, is easy to recognize because of the time frame. The price-action chart, for a period of 25 years or so would appear to be nothing more than a number of straight lines moving gradually up or down.



Within all “primary” trends are “intermediate” trends, which keep the business journalists and market analysts constantly searching for the answers as to why an issue or a market suddenly turns in the direction opposite to that of day or a week before. Sudden rallies and directional turnarounds make up the intermediate trends and, for the most part, are the results of some kind of economic or political action and its subsequent reaction.