• 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