Trends are the general movement of one asset towards another over time. The trend is a general indication of where the market will go next. In a currency market this means that the value of one currency will be compared to that of another currency in relation to a common trend. The trend can be negative or positive.
Trend lines generally show the trend of prices and the trend of volumes over a period of time. The overall direction and momentum of the economy, price, industry, or other measurable aspect. The current state of affairs in a particular market, day-to-day or over a longer period of time viewed as a trend. A popular belief of the overall market in a particular day viewed as a trend.
Technical analysis uses technical indicators and charts to identify and analyze the strengths and weaknesses of trends. The trendlines are considered to be the most valuable technical indicators in the Forex market. Traders look for trendlines as confirmations of positions over time. They also believe that trendlines are extremely useful indicators when it comes to identifying breakouts in trading. Here are some of the major types of trend lines that are seen frequently in technical analysis.
These trend lines are referred to as resistance and support. Resistance is where the stock market prices are pushed up while support is where they are pulled down. They are commonly used in stock market analysis to indicate where the price movements are likely to go next. There are many forms of resistance and support such as; traditional rectangle, diamond, curved, and other technical indicators.
Long-term traders want to know when a stock price is overbought or oversold. Short-term traders want to know when the current stock price is underbought or oversold. There are many technical analysis charts that traders use to identify these long-term trends. The moving averages is one such chart that is widely used in technical analysis to determine the over and undersold periods in the market trends. The parabolic SAR, oscillators and other charts can also be used to identify long term trends. These charts are useful because they provide high resolution and high quality information that are helpful in stock price predictions.
Dow Theory is a popular technical analysis tool that is often used by short-term traders. Dow theory indicates that the strength of the current stock price is proportional to the strength of the Dow. So if the Dow Jones Industrial Average rises then this means that there is a strong business cycle in the US market trends. This is similar to the strength of the previous and current uptrend in the US economy and is used in determining the short-term and long-term business cycle in the market trends.
