- What is a Trend
- Trend Directions
- Trader Decisions
What is a Trend?
- The general direction of the market
- Markets don’t move in a straight line but instead move in Zig Zags creating tops and bottoms
- It’s the sequence and direction of these tops and bottoms that identifies the trend
- Price movements develop in three different directions
- Uptrend – Downtrend – Range
Uptrend
- Higher Tops
- Higher Bottoms
Downtrend
- Lower Tops
- Lower Bottoms
A Trend is More Likely to Continue than to Reverse
- A trend is assumed to be in effect until it gives a clear signal that it has reversed
- “The trend is your friend”
- “Never go against the trend”
- By following trends over different time frames traders can increase their profit-making opportunities
Trading Decisions
Time Frames
- Traders often feel confused when they look at charts in different timeframes and see that the market is going in several directions at once
- The trend may be up on the weekly chart but down on the daily, and vice versa
- So which of these trends should you follow?
Market has Three Movements
- The main movement lasts for more than a year, and possibly several years
- The secondary movement that usually lasts between three weeks to six months
- The minor movement lasts less than three to four weeks
