Tel: +977 1 4386418 / 9841718296 / 9843654805 / 9851276418
Email: info@sharegurukul.com.np

Trends

  1. Home
  2. Trends

What is a Trend?

  • Prices rise and fall in Trends
  • Trend is defined as:
    • Up (Rising) Higher Peaks and Lower Troughs
    • Down (Falling) Lower Peaks and Lower Troughs
    • Sideways (Trading Range) Peaks and Troughs are at roughly similar

“Trend is a direction, not a straight line.”

Trend Classification

  • Technical Analysts have divided trends into three categories:
    • Primary: Measured in Months or Years
    • Secondary (or intermediate): Measured in Weeks or Months
    • Short-Term : Measured in Days
    • Intraday : Measured in Minutes or Hours
  • Charles H. Dow first defined this model.

Fuzzy Logic

  • Q: Does the slope of the trend matter?
  • A: It depends! If we saw slopes that are wildly different from the norm, then yes.
  • This is the “art” part of Technical Analysis.
  • All Analysts occasionally make statements that seem like facts, but they are often subjective observations.
  • There will be many concepts that are built on years of observation.
  • Many of these were developed before there were any quantitative techniques.
  • In time, as evidence is presented, these will be proven or dismissed.

Trends – The Key to Profits

  • Every TA Signal and theory is centered on capturing the trend.

Key to Profit

  • Determine, with minimum risk of error when a trend has begun at its earliest time and price.
  • Select and enter a position in the trend that is appropriate to the existing trend, regardless of direction.
  • Close those positions when the trend is ending.
  • The more objective and rules-based we can be, the better.
  • This sounds simplistic, but it’s the basis of all Technical Analysis.

The Trend Line

  • We draw trend lines as a visual cue of a break in the line.
  • This is a possible signal of a change in trend.
  • Where we draw a trend line depends on the direction of the trend:
    • Uptrend – we connect troughs
    • Downtrend – we connect peaks
    • Sideways – connect peaks and connect troughs

Trend Line Rules

  • The more times a line is touched, the more significant It is.
  • The steeper the line, the sooner it will be broken. Steep is a relative concept.
  • Should never be considered “exact”.

Volume to confirm Change in Trend

  • High Volume confirms significant reversal points.