Noun. The downward trend to which something moves in a predictable direction. Digital technologies is currently the newest trend in media. During the past two years there’s been an alarming trend toward obesity amongst children. Verb. a trend toward cancellation of school by some schools during the fall or at least a light snowfall.
Trend trading strategies take advantage of these trends. For instance, a stock trader may make a profit buying stock A in May and then selling it for more than he paid in May. This is called shorting stock. A trader who has a long term strategy, may use a trend analysis tool to detect similar trends. These trend analysis tools can be implemented on existing trading platforms.
Traders use the markets for different purposes. Some traders buy products when the market is trending up so that they make a profit when it turns down. Other traders use the markets when they sense a downturn in the market such as with the housing bubble bursting. When this happens, they sell in order to take advantage of the uptrend in the market.
The trader does not have to follow the market throughout the whole trend. The trader can find trendlines and draw their own lines connecting points. If you are looking for a particular trend, you can find it using one or more of the available technical indicators in a trendline graph. You can determine if a price has reached a certain threshold by the size of the wedge. But, trendlines are not only useful for identifying trend and price patterns; they can also provide additional support or resistance levels in other terms.
Technical analysis is used to study trends and the behavior of the markets. Using basic concepts of technical analysis, traders predict the direction of trends based on the direction of the trendlines. There are many technical indicators available for analysis of trends and some of the most popular include Moving Average Convergence/Divergence (MACD), Simple Moving Average Convergence (SMA) and Exponential Moving Average Convergence (E MACD). These indicators are not perfect but provide good information for trend analysis. These indicators are also helpful for traders who want to trade forex.
The idea of using price action to determine the direction of a trend is not new. Many traders use it in conjunction with technical analysis to successfully trade. However, for non-technical analysis traders, the trendline provides an easy way to identify profitable trends. Since prices follow a pattern, using the price action alone to determine the direction of the trend is the best strategy. This strategy is especially useful for traders whose trading behavior is characterized by erratic or non-periodic price action.
