What is a trend and what are its types?
The trend is considered the general trend in which the market values or the price of the asset develop and helps in predicting and analyzing the market situation, such as an uptrend, a downtrend or a side trend. In order to determine the prevailing trend in the market, it is necessary to draw trend lines and use technical indicators.
Trends vary in length as they can be classified as follows:
🔸 Long-term or main trend: its duration is from 6 months to 2.5 years, it can be traced on the chart and using the weekly time frame W1 or monthly MN and it consists of a group of medium and short-term trends that usually form against the direction of the main trend.
🔸 Medium-term or secondary trend: its duration is from one week to two months, it is better observed on the chart and using the daily time frame D1 and the 4-hour H4.
🔸 Short-term trend: its duration is less than a week, it is tracked on the chart and using the time frame 1H and minutes MN.
It is important for a trader to be able to identify trends and trade with them, but it is also necessary to understand their forms. There are three types of trends:
🔸Positive uptrend: It is used to describe the rise of a financial instrument on the chart and consists of a group of positive tops and bottoms. The bullish trend is linked to two basic conditions for its occurrence or to confirm it, which is when two bottoms and two ascending tops form, i.e. a breach below this level indicates the weakness of the trend and the possibility of its reversal.
🔸Negative downtrend: It is used to describe a falling condition for a financial instrument on the chart and it consists of a group of negative tops and bottoms. The bearish trend is linked to two basic conditions for its occurrence or to confirm it, which is when two bottoms and two descending tops form, if there is a clear resistance line that connects at least two tops and forms an upper boundary that prevents the price from moving higher, any breakout above this level indicates the weakness of the trend and the possibility of its reversal.
🔸 The horizontal, flat side trend: When there is a very slow price movement with convergence between sellers and buyers, we usually notice that the financial instrument does not take a clear direction and goes sideways on the chart, that is, when a clear upward or downward trend cannot be identified.