What is a trend?
What is a trend - The direction the market moves is called a trend. This can be either sideways, up or a downward movement. We are looking to make money by buying when the trend is up and selling when it's down.
When we look at a price chart we see a zigzag pattern of peaks and troughs. These peaks and troughs are created by the supply and demand in the market.
When the trend is moving upwards we can see these zigzag patterns moving upwards. These peaks and troughs are showing the market is moving higher. This movement present a buying opportunity.
The reverse is also true of a down trend. If the peaks and troughs are continually moving lower we have a down trend. We can open a sell position and let the dropping market make money for us.
When the market is moving sideways it is called trend-less. It will move between two points in the market and it will stay between these points until a trend develops. This can be a difficult time for a trend following system as it can lose money. A trader can use a sideways trading system during these times and buy (bottom) and sell (top) at the top and bottom of the trading range.
When we know how a trend moves we can use this information to make us money. However we need to understand that different time frames can produce different trends at the same time.
The time scales are called major, intermediate and near term. A major trend is any trend that last over a 6 months. An intermediate trend is between 3 weeks and 6 months and a near term trend lasts less than 3 weeks.
The type of trend we are trading depends on the time frame we are using. We may have an up trend in the monthly chart but a down trend in the daily chart. It is essential that we understand the time frame and the trend we are trading.
When we use news feeds or financial websites for information if they talk about a trend we need to know the time scale they are talking about. If we do not know what the time scale is we cannot use the information. Once we know the time scale we can understand and profit from their information.
What is a trend - The direction the market moves is called a trend. This can be either sideways, up or a downward movement. We are looking to make money by buying when the trend is up and selling when it's down.
When we look at a price chart we see a zigzag pattern of peaks and troughs. These peaks and troughs are created by the supply and demand in the market.
When the trend is moving upwards we can see these zigzag patterns moving upwards. These peaks and troughs are showing the market is moving higher. This movement present a buying opportunity.
The reverse is also true of a down trend. If the peaks and troughs are continually moving lower we have a down trend. We can open a sell position and let the dropping market make money for us.
When the market is moving sideways it is called trend-less. It will move between two points in the market and it will stay between these points until a trend develops. This can be a difficult time for a trend following system as it can lose money. A trader can use a sideways trading system during these times and buy (bottom) and sell (top) at the top and bottom of the trading range.
When we know how a trend moves we can use this information to make us money. However we need to understand that different time frames can produce different trends at the same time.
The time scales are called major, intermediate and near term. A major trend is any trend that last over a 6 months. An intermediate trend is between 3 weeks and 6 months and a near term trend lasts less than 3 weeks.
The type of trend we are trading depends on the time frame we are using. We may have an up trend in the monthly chart but a down trend in the daily chart. It is essential that we understand the time frame and the trend we are trading.
When we use news feeds or financial websites for information if they talk about a trend we need to know the time scale they are talking about. If we do not know what the time scale is we cannot use the information. Once we know the time scale we can understand and profit from their information.
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