Trend

Trend

A trend is the general direction of the price of an asset on the market. You can see from any chart that prices never move in straight lines, they are constituted of series of highs and lows. There are three types of trends:

  • Uptrend (bullish trend) consists of series of higher highs and higher lows (prices are moving up). One may speak about an uptrend if there is a clear support line, connecting at least two lows and limiting the downside. A break below this line signals trend's weakness or reversal.

  • Downtrend (bearish trend) is classified as a series of lower lows and lower highs (prices are moving down). A downtrend can be defined if there is a clear resistance line, connecting at least two highs and limiting the upside. A break below this line signals trend's weakness or reversal.

  • Sideways (flat, horizontal) trend – there is no well-defined trend in either direction.

In terms of length, trends can be classified as:

  • Long-term (6 months – 2.5 years) – major trend which can be traced on a weekly or monthly charts. It is composed of several medium-term and short-term trends, which often move against the direction of the major trend.
  • Medium-term (1 week – a couple of months) is better seen on the daily and H4 charts.
  • Short-term (less than a week) is better seen on hourly and minute charts. 

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