A trend is a general direction into which something is changing, developing or veering. The word can also refer to a fashion or craze, such as a new type of clothing style or a popular music genre. Trends are often observed in the areas of business, finance and politics. In business, trends are important because they can help identify the direction of future growth.
A business that understands and follows a clear, consistent direction can grow much faster than one that isn’t. However, it’s not enough to simply know the direction of a business trend and take action in that direction. It’s vital to also know what shapes and sustains a business trend, as this can have a significant impact on the success or failure of a particular investment strategy.
The fundamentals of the underlying financial asset are the major influencers on the overall trend, but it’s also important to consider the human emotions that may fuel or undermine a trading strategy. Fear, greed and confidence can all have an impact on the prevailing market sentiment, which may then shape or change the trend.
To calculate a trend percentage, you need to look at the data you’re analysing and find out how it compares to previous periods of time. This can be done with spreadsheets and other common business software, or it may require you to go back through the accounts over a given period of time to see how the results have changed. You then divide the data you’re looking at by the total amount of data from the base year and multiply by 100 to get the trend percentage.
There are many different ways to identify a trend, but most traders prefer to use technical analysis tools such as candlestick patterns and indicators. One of the most reliable ways to determine a trend is to draw a line between three high points on the chart and check that the lines point down. It’s possible to find a downtrend by drawing just two points, but it’s generally considered less reliable.
Whether you’re using business software or manually evaluating data, the most important thing is that you and your advisers are aware of the trends in your business and understand what’s shaping them. This allows you to make more informed decisions and avoid getting caught off guard by a sudden change in the direction of your business.
In order to maximise the benefits of your business, you need to invest some time in trend analysis. The more you work on your business, the more efficient it will become. This is because the Pareto principle (80% of consequences come from 20% causes) applies to every function in a business, including sales, customer service and financial performance.