Hello, dear readers of the blog site! Today we have, perhaps, a fundamental topic, without which it is absolutely impossible to trade on the financial market; we will analyze what a trend is in Forex, find out how to determine it and evaluate the pros and cons of trading with a trend.
As the Batman character Harvey Dent said: “The darkest night before the dawn.” Phase No. 2 begins. Dow calls it the participation phase, Alexander Wolverin calls it further accumulation. The criteria for an uptrend are emerging, average traders begin to see it and join in trading on a new bullish trend.
The result is that the bullish trend is strengthening. As a rule, this happens against the backdrop of improving macroeconomic indicators - the state is emerging from the crisis, prosperity begins again, everyone is happy.
The third phase is exhaustion. Professional traders who opened sideways in phase No. 1, as well as middling speculators who traded with the trend, begin to close their positions either against the backdrop of impending fundamental changes, or due to already sufficient profit. However, as we see, the trend does not weaken, but even accelerates before turning sideways.
The reason is this. Analysts on television are beginning to urge the population to buy certain assets, predicting rising prices. As a result, the crowd (which cannot even be classified as average traders) rushes headlong into the pool. People do not understand what they are doing, but they buy a financial asset, succumbing to the awakened thirst for profit.
There are a lot of people, prices are making their last desperate push. At the top of the peak, the bears get to work: they open bearish trades, the crowd’s dreams of getting rich are dashed, a side trend is formed, essentially primary accumulation, but with the goal of reducing the price of a financial asset.
The third phase, or more precisely, the type of behavior of people during the period of its formation, is a very common phenomenon, which even received a separate name - crowd frenzy. History knows many interesting cases. One of these is Russian people and the dollar exchange rate. When the price rose to 70 - 80 rubles, analysts on almost all channels said: “Buy! It will rise again soon!” People lined up and bought dollars. The result was that the currency dropped to 57 rubles, and the crowd was duped.
I highlighted in red a short-term consolidation - a period of desperate struggle for fading hopes, which ended, of course, with the defeat of the masses and the victory of the bears.
We’ll talk about two other similar situations related to tulip bulbs and the cryptocurrency called “bitcoin” in the article about price.
One more moment. Short sideways trends or consolidations within an uptrend are a “position acquisition zone.” Here the bulls are opening a lot of bullish trades, but the trend cannot yet explode upward. You need to gather a lot of speculators who open downside trades from the resistance level (counting on the completion of the current trend and the upcoming price decline), in order to then sharply knock them out, take the money and continue to form an upward trend. The same applies to sideways during a downtrend.
This has two important consequences. First. If the market has been going up and has stalled sideways, it is always easier for it to continue its trend if there is no fundamental or other evidence of an upcoming reversal: you just need to accumulate strength at the expense of amateurs and sweep them out of the way. Smart people, seeing a sideways trend, will not take it as 100% proof of a market reversal (criteria for the formation of an upward/downward trend are needed).
Secondly, a lot of people were trading in the sideways and consolidation zone, there were a lot of Stop Loss there. If the market goes into a correction and approaches the zone of previous consolidation, it can reverse from its middle.
Under what conditions does a sideways trend exit and the previous trend continue or a new trend begin? Conditions vary. Either large players inflate the price and make a “throw out”, or news comes out that pushes the market in a certain direction.
When we get to technical analysis, I will note that at the Stop Loss level when trading in a sideways trend, it is necessary to place pending stop orders so that the market, if it takes your stop with a powerful push, opens a position for you in the direction in which it decided to move.
Trading with and against the trend
If the market is the same as a crowd of people, what is the best way to trade, with or against the trend? It would hardly be logical to go against the crowd, especially if it is moving aggressively. It's much safer to follow along with her.
Only top players can play against the trend, but they also do it when they feel the current trend is weakening.
Corrections within a trend are nothing more than a tempting trap for amateurs. As soon as prices begin to decline a little, inexperienced players think: “A reversal is about to happen! I’ll have time to fit in at the very beginning!” - and open positions.
Bulls or bears do not forbid them from doing this: let beginners have fun and open more positions. Then the majority shareholders suddenly begin to trade and knock inexperienced speculators out of the market, taking their money for themselves. If there is still little money, bulls/bears, instead of allowing a corrective pullback, allow the crowd to form a range and trade in it for some time.
The market does not turn around immediately. Until signs of a reversal and an emerging new trend appear, trade with the current trend or speculate sideways.
By the way, regarding the sidewall and not only that. Japanese candles have bodies and shadows or tails (they are rarely called wicks). A market in a sideways trend or bullish/bearish trend will sometimes throw long tails beyond support and resistance levels. What information do they provide us about the state of the market?
Traders' opinions are divided in this regard. Some people don’t take tails seriously, but even build lines of support and resistance exclusively based on them. Their logic: “The price was there.” Whether they are right or wrong is difficult to say. Everyone has their own views on the market.
Alexander Elder writes that the market most often shies away from tails. If a tail is observed on the chart, it means that the price it tested was rejected. Conclusion - you need to trade in the anti-tail direction. Stop Loss Elder recommends placing it in the middle of the tail.
Let's look at the EUR/USD chart on a weekly scale. There is a strong decline in the exchange rate, which turned into a slight sideways movement. If we outline its boundaries, we will see tails at the resistance line (above).
The first is especially pronounced. According to the strategy, we should open bearishly and place a protective order in the center of the tail. The idea implements itself well.
Conclusion
So, dear readers, we have examined the concept of a trend in the financial market, and in parallel with it, many other interesting things. I planned to describe specific trading strategies later, in a separate material on graphical analysis, but it’s probably even better that they are posted here.
I ask you to read carefully and look at all the examples. Ideally, look for similar situations on the charts of currency pairs and share your impressions in the comments. You cannot attach a screenshot to comments, so if necessary, indicate the name of the currency pair, timeframe and time interval that needs to be analyzed, we’ll see together.
In future materials, we will get acquainted with some more key terms for trading, then we will either study a number of brokerage firms, or move directly to analytics.
– this is the direction of movement of the price of an asset, which has formed within a certain time period. The term “trend” is often used as a synonym for this concept, which can be formulated as the most likely direction of price movement in the future, determined on the basis of its previous and current state. In both cases, the key link is directionality, which is the most important aspect of predicting price movements and trading in general. Its goal is to make a profit based on changes in the value of an asset in a pre-selected direction.
One of the fundamental laws of technical analysis states that price movement is directional and subject to trends. Contrary to what many non-traders think, the market is not as chaotic as it may seem. And this is exactly what the law above states. Thanks to the direction of price movements, it becomes possible to analyze them, forecast them and make successful trading decisions. If the market were truly that chaotic, there would not be many successful traders who were able to methodically make profits over a long period of time.
Understanding and competent use of such a basic concept as a trend is the first condition for the formation of a holistic vision of the market. A huge number of indicators, trading strategies or graphical models are all based on fundamental concepts, the knowledge of which is extremely important in order to fully use the potential of the above-mentioned tools.
Having studied the features of a trend, a trader can successfully trade even without the use of complex indicators or confusing systems, which once again proves the importance of basic principles in comparison with sometimes overly cumbersome new methods.
Types of trend.
The market is fickle, it can be either extremely dynamic or very calm, but despite this, three most common conditions can be identified, each of which has its own characteristics and features.
1. Lateral movement- this is a market condition in which the price of an asset changes within a small corridor, without rising above a certain maximum and without falling below any minimum value. It is necessary to understand that the most important part of any trend is the time interval in which the analysis is performed. For example, on the four-hour charts there will be a sideways, calm movement, but as soon as you go down a couple of time frames, the situation changes dramatically, and the market acquires dynamic and wide movements.
This condition is typical for periods when there are a small number of traders on the market, as well as when the demand for an asset is low, which causes small dynamics of price changes. For this, in English the word “flat” is used, which means “smooth, flat”. The period when the price moves in such a narrow range is most favorable for scalping or quiet trading.
2. Upward movement– this is the dynamics of price changes, in which the value of each subsequent local minimum turns out to be greater than the previous one, as a result of which there is a clear progressive increase in the value of the asset. Visually, all minima (or most of them) can most often be located on a straight inclined line. This trend is also called "bullish", comparing the rising price to a bull that attacks with its horns using a strong upward thrusting motion.
A rising price symbolizes the favorable state of the asset, high demand for it, as well as a more optimistic view of market participants. Uptrends are characteristic of strong or strengthening currencies and stocks, which are supported by positive news, reports and other factors. When using a trend following strategy, you should open buy trades during this period, since the price is likely to rise in the future.
3. Downward movement– the dynamics of price changes, which is characterized by a sequence of local minima, each of which is higher than the previous one. As with an uptrend, often these local values can be located on the same inclined line. Opposite to the upward, “bullish” trend, this type is called “bearish” because of the analogy with an attacking bear, which stands on its hind legs and strikes with its front paws from top to bottom with all its weight.
A fall in the value of an asset is the result of both individual economic, political or other factors and the result of their cumulative impact. At such a time, it is worth following the market and opening sell transactions, since the probability of success when choosing this direction will be significantly higher.
Characteristics of the trend.
A trend has several important properties, each of which can significantly affect its assessment as a whole. Determining the general direction of movement can be quite difficult, but it is much more difficult to create a more detailed picture, on the basis of which one could open a profitable trade. The latter is a companion of experience, thanks to which a better feeling of the situation comes, but in general it is enough to consider the 3 most important properties that form the basis of the trend:
1. Direction is the first and most important property. It is extremely important for beginners to understand the importance of scale in determining a trend, since the situation can be radically different at different time intervals. Because of this, a correction (the stage of a trend when the price stops moving in the original direction and returns a little back) can be perceived as an independent trend, which leads to incorrect decisions. How to correctly determine the trend will be discussed below.
2. Strength - the more points there are through which a trend line can be drawn, the stronger and more important the current trend. It is also important to pay attention to the angle of the trend line: the steeper the degree of inclination relative to the horizontal, the less influential the movement. Those. very steep movements do not have the same power as trends that develop relatively smoothly and over a long period of time. The ideal angle for upward and downward movement is 45 degrees.
3. Duration– the longer a trend exists, the stronger it is. This property is relevant for higher timeframes, since within a day the price is extremely mobile and dynamic. But at the same time, there are tactics that allow you to very effectively use the global trend on a local scale.
Determining the trend.
First of all, you need to remember one simple truth - nothing is ideal in this world, and the market cannot be called such either. All definitions, diagrams, connections are extremely conditional. The success of trading does not depend on how well you have memorized any definition, but on how deeply you understand the essence of the phenomenon in question. Your success depends on your ability to improvise, look at things outside the box, and understand their imperfections.
Therefore, a less than ideal market situation was chosen as an example for study. At the end of this point, you will see for yourself that a profitable trade does not always have to be perfect. So, let's look at the main stages of determining a trend:
1. Local points– the first step is to determine local minimums and maximums that are visually accessible within a small time interval relative to the timeframe. If you have the “M30” chart open, then you do not need to review the entire previous month to determine the trend; choose a comparable period. For beginners, it is still better to use special graphical tools of the trading terminal (in this example, “Meta Trader”), and over time you will easily be able to carry out all procedures without them.
– now it is necessary to determine the dynamics by connecting as many minima and maxima as possible with separate straight lines. The interesting thing is that with a pronounced trend, both will indicate the same direction. With experience, this stage will be simplified to connecting only one of the groups (highs or lows) depending on the trend. Also study the materials on support and resistance lines, since that is what you have now built. As a result, you have a trend line connecting local price zones and indicating the vector of further movement.
Surely many of you were surprised at how ugly the maxima are connected. But, as mentioned above, the market is not ideal, which is why the construction of a trend line has its own characteristics.
The line does not have to perfectly connect all the points. Moreover, the generally accepted definition of “trend line” is not entirely correct. It is more appropriate to talk about a trend zone or area that forms at a distance of several points from the line in both directions. The price will never move from the line you have built to the point, and this is extremely important to understand. It may not reach several points during the correction process, make a false breakout of the constructed level, or may not approach it at all, sharply rushing in the desired direction without any rollbacks.
One of the subtleties of drawing a trend line is knowing the exceptions. Such an exception is the concept of a false breakout, which can be described as an unsuccessful (but sometimes extremely convincing) attempt by the price to break through the existing level and reverse the direction of its movement. Without going into details, in the above example this is exactly the case: the price with an upward jerk broke through the line and closed above it, but the next candle with an even greater jerk returned the market to the desired direction and closed significantly below the line, while maintaining its value .
There are also special features when the price does not reach the line. Many traders believe that when building a trend, it is correct to connect only the bodies of the candles (the gap between the opening and closing), and not the shadows (the maximum and minimum values). This is true for the basic (extreme) points, but some intermediate (internal) stages can be “captured” by the upper parts of the candles. In addition, this can be explained by the lack of strength of traders trading against the current trend, which further confirms its significance.
Looking a little further in the direction of the trend, you can see a very pleasant picture. By constructing such an imperfect trend line and opening a trade at the last touch, one could potentially get a very good income (based on the maximum calculation of the distance traveled), since the price obediently went in the desired direction, without even trying to test or break the trend line.
Application.
A trend can be used as an independent phenomenon, without relying on additional tools, or you can try to reveal hidden potential using a variety of techniques and methods.
The most popular is to use the trend as a fundamental part of graphical analysis. You can use simpler (in terms of logic) methods, such as trading from support and resistance levels, or delve into the study of the variety of graphic models and patterns. The use of these techniques requires certain skills, such as: photographic memory, the ability to identify organized price patterns from many individual movements, and perseverance. Skillful use of your abilities, as well as the advantages of graphical analysis, can lead to amazing success.
The second option for using a trend is trading using technical indicators. There is even an item in the Meta Trader terminal that collects some of the instruments of this group. To insert them, you need to follow the path “Insert – Indicators – Trend”. But, despite its apparent simplicity, this method requires no less effort and skill.
You can often hear about various combinations of elements of graphical analysis with indicator analysis. And this has the right to life. As already mentioned, one of the most important factors for success is the ability to improvise and look at things outside the box. It is not possible to consider even in general terms all methods of trading using a trend within the framework of this material, but now you have the basis, and it is up to you to decide which direction to go deeper into.
Conclusion.
The eternal dream of any trader comes down to knowing what will happen to the market in the future. Complex mathematical calculations, oscillators and indicators, trading systems that turn a blank sheet of a price chart into the canvas of some crazy artist... All this for one single purpose - to look into the future and make the right choice now.
Graphic analysis with its rich history has not faded into the background and has not lost its relevance in the age of the total prevalence of computer technology and mathematical sophistication. Its accessibility and simplicity prompt some to say that all this has not worked for a long time, that this method of analysis has become obsolete and should give way to more modern, fresh methods. But classic graphical analysis still regularly brings profit to traders all over the world, while its opponents invent the next formula, analyze data arrays and try to create something ideal through trial and error.
Understanding trend movements, independently building relationships, analyzing and making decisions based on your thoughts, and not the result of mathematical calculations - all this has a soul, no matter how stupid or pathetic it may sound. Maybe all this really is becoming a thing of the past, and very soon much more advanced trading methods will be found. Maybe. But what is really worth doing is to start your journey by working more closely with the trend, while gaining valuable experience in observing all the madness of the market.
Every year, Ford publishes a report that provides an analysis of key trends in consumer sentiment and behavior. The report is based on data from surveys conducted by the company among thousands of residents of different countries.
Rusbase reviewed the global research and selected 5 main trends that are now defining our world.
Trend 1: New format of a good life
In the modern world, “more” no longer always means “better,” and wealth is no longer synonymous with happiness. Consumers have learned to derive pleasure not from the very fact of owning something, but from how this or that item affects their lives. Those who continue to flaunt their wealth only cause irritation.
“Wealth is no longer synonymous with happiness”:
- India – 82%
- Germany – 78%
- China – 77%
- Australia – 71%
- Canada – 71%
- USA – 70%
- Spain – 69%
- Brazil – 67%
- UK – 64%
People who flaunt their wealth annoy me.»:
- 77% of respondents aged 18-29
- 80% of respondents aged 30-44
- 84% of respondents aged 45+
Examples from real life confirming the growing popularity of this trend:
1. The benefits of labor results are more important than profit
Example 1:
Rustam Sengupta spent a significant part of his life following the traditional path to success. He earned a degree from a top business school and landed a high-paying consulting job. And so, returning one day to his home village in India, he realized that the local residents lacked the simplest things, suffering from problems with electricity and the lack of clean drinking water.
In an effort to help people, he founded the non-profit company Boond, designed to develop alternative energy sources in the northern regions of India.
Example 2:
When New York lawyer Zan Kaufman started working at her brother's burger joint on weekends as a way to break up the monotony of her office work, she had no idea that the job would change her life so much. Having moved to London a year later, she did not send out resumes to law firms, but bought herself a truck to sell street food, founding her own company, Bleecker Street Burger.
2. Free time is the best medicine
Millennials (ages 18-34) are increasingly looking to escape the hustle and bustle of the city and their addiction to social media by choosing a vacation that is more unique and interesting than lying on the beach at an all-inclusive hotel. Instead, they want to make the most of their holidays, opting for yoga clubs and culinary tours in Italy.
The total volume of the global industry of such extraordinary travel is currently estimated at 563 billion dollars. In 2015 alone, more than 690 million wellness trips were organized worldwide.
Trend 2: The value of time is now measured differently
Time is no longer a valuable resource: in the modern world, punctuality is losing its appeal, and the tendency to put things off until later is considered absolutely normal.
72% of respondents worldwide agreed with the statement “3 Activities that I previously considered a waste of time no longer seem useless to me».
Over time, the emphasis shifted and people began to recognize the need for the simplest things. For example, to the question “ What do you think is the most productive way to spend your time?” the answers were as follows:
- sleep – 57%,
- surfing the Internet – 54%,
- reading – 43%,
- TV viewing – 36%,
- communication on social networks – 24%
- dreams – 19%
British students have a long tradition of taking a gap year after leaving school and before starting university to better understand what path to take later in life. A similar phenomenon is gaining increasing popularity among American students. According to the American Gap Association, over the past few years the number of students who have decided to take a gap year has increased by 22%.
According to Ford survey results, 98% young people who decided to take a gap year after school said that the break helped them decide on their life path.
Instead of “now” or “later,” people now prefer to use the word “someday,” which does not reflect a specific time frame for completing a particular task. In psychology, there is a term “procrastination” - a person’s tendency to constantly postpone important matters until later.
Number of people surveyed around the world who agreed with the statement “ Procrastination helps me develop my creativity»:
- India – 63%
- Spain – 48%
- UK – 38%
- Brazil – 35%
- Australia – 34%
- USA – 34%
- Germany – 31%
- Canada – 31%
- China – 26%
1. We don’t know how not to get distracted by small things.
Have you ever encountered a situation where, after several hours of searching for the necessary information on the Internet, you find yourself reading completely useless, but extremely fascinating articles? We've all experienced something similar.
In this regard, the success of the Pocket application is interesting, which postpones the study of fascinating publications found during the search until later and helps to focus on what is really important right now, but without the risk of losing sight of something interesting.
Currently, 22 million users have already used the service, and the amount of publications postponed for later is two billion.
2. Meditation instead of punishment
Offending Baltimore elementary school students no longer have to stay after school. Instead, the school has developed a special program called Holistic Me, which invites students to do yoga or meditation to learn to manage their emotions. Since the program began in 2014, the school has not had to expel a single student.
3. If you want your employees to work efficiently, ban overtime work
The working day of the advertising agency Heldergroen in the suburbs of Amsterdam always ends exactly at 18:00 and not a second later. At the end of the day, steel cables forcefully lift all desktops with computers and laptops into the air, and employees can use the free space on the office floor for dancing and yoga to work less and enjoy life more.
“It has become our kind of ritual, drawing the line between work and personal life,” explains Zander Veenendaal, the company’s creative director.
Trend 3: The problem of choice has never been so relevant
Modern stores offer consumers an incredibly wide variety of choices, which makes it difficult to make a final decision, and as a result, consumers simply refuse to purchase. Such diversity leads to the fact that people now prefer to try many different options without buying anything.
Number of respondents worldwide who agreed with the statement “The Internet offers way more options than I really need.”:
- China – 99%
- India – 90%
- Brazil – 74%
- Australia – 70%
- Canada – 68%
- Germany – 68%
- Spain – 67%
- UK – 66%
- USA – 57%
With advent, the selection process becomes less obvious. A huge number of special offers misleads buyers.
Number of respondents who agreed with the statement “After I buy something, I begin to doubt whether I made the right choice?”:
- 60% of respondents aged 18-29
- 51% of respondents aged 30-44
- 34% of respondents aged 45+
With approval “Last month I couldn’t choose just one thing from so many options. In the end, I decided not to buy anything at all.” agreed:
- 49% of respondents aged 18-29 years
- 39% aged 30-44 years
- 27% aged 45+
This can be explained by the fact that with age, purchases occur more consciously and more rationally, so this kind of question arises much less often.
Examples from real life confirming the growing popularity of the trend:
1. Consumers want to try everything.
Consumers' desire to try a product before purchasing is influencing the electronics market. An example is the short-term gadget rental service Lumoid.
- For just $60 a week, you can take it for a test to finally understand whether you need this $550 gadget
- For $5 a day, you can also rent a quadcopter to decide which model you need.
2. The burden of credit kills the joy of using a gadget.
Expensive equipment taken on credit increasingly ceases to please millennials, even before the loan is repaid.
In this case, the startup Flip comes to the rescue, created so that people can transfer their annoying purchase to other owners, along with obligations for further loan repayment. According to statistics, popular products find new owners within 30 days from the date of the advertisement.
And the Roam service has begun operating on the real estate market, which allows you to conclude just one long-term rental agreement, and then choose a new place of residence at least every week on any of the three continents covered by the service. All residential properties Roam works with are equipped with high-speed Wi-Fi networks and state-of-the-art kitchen equipment.
Trend 4: The downside of technological progress
Does technology improve our daily lives, or only complicate it? Technology has truly made people's lives more convenient and efficient. However, consumers are beginning to feel that technological progress also has a negative side.
- 77% of respondents worldwide agree with the statement “ The craze for technology has led to an increase in obesity among people»
- 67% of respondents aged 18-29 confirmed that they know a person who broke up with their other half via SMS
- The use of technology not only leads to sleep disturbances, according to 78% of women and 69% of men, but also makes us stupider, according to 47% of respondents, and less polite (63%).
Examples from real life confirming the growing popularity of the trend:
1. Technology addiction exists.
Recent successes of the company's projects have shown that people become addicted to watching new TV shows in the shortest possible time. According to a global study, 2015 series such as “House of Cards” and “Orange is the New Black” made viewers eagerly await each new episode in their first three to five episodes. At the same time, new series such as Stranger Things and Annealing managed to hook viewers after watching just the first two episodes.
Modern smartphones have become an important part of the lives of children who can no longer live without them for a day. American researchers have proven that time spent on smartphones has a negative impact on schoolchildren’s performance. Children who spend 2-4 hours on mobile devices every day after school are 23% more likely to fail their homework compared to peers who are not so dependent on gadgets.
3. Cars save pedestrians
According to the National Highway Traffic Safety Administration, there is a pedestrian collision every eight minutes in the country. Most often, such accidents occur due to the fact that pedestrians send messages while walking and do not watch the road.
To increase the level of safety for all road users, it is developing innovative technology that can predict people's behavior, thereby reducing the severity of the consequences of road accidents and even in some cases preventing them.
Twelve experimental Ford cars drove more than 800 thousand kilometers on the roads of Europe, China and the USA, accumulating a data set totaling more than a year - 473 days.
Trend 5: Change of leaders, now everything is decided not by them, but by us
Who today has the most significant influence on our lives, the environmental situation in the world, the social sphere and healthcare? For decades, money flows have primarily moved between individuals and organizations, whether government agencies or commercial enterprises.
Today we are more we begin to feel responsible for the correctness of decisions made by society as a whole.
To the question “ What is the main driving force that can change society for the better?” respondents responded as follows:
- 47% – Consumers
- 28% – State
- 17% – Companies
- 8% – abstained from answering
Examples from real life confirming the growing popularity of the trend:
1. Businesses must be honest with consumers.
The American online store Everlane, specializing in the sale of clothing, builds its business on the principles of maximum transparency in relationships with suppliers and clients. The creators of Everlane have abandoned the sky-high markups for which the fashion industry is famous, and openly show on their website what the final price of each item is made up of - the site displays the cost of material, labor and transportation.
2. Prices must be affordable for consumers
The international humanitarian organization Doctors Without Borders is actively fighting the high cost of vaccines. It recently refused to accept a donation of one million doses of a pneumonia vaccine because the composition of the drugs was protected by a patent, which negatively affects the price of the final product and makes it inaccessible to residents of many regions of the world. With this action, the organization wants to highlight the importance of addressing the issue of drug affordability in the long term.
3. More and more services should appear for the convenience of users
To attract attention to the l service and reduce the number of cars on the roads, Uber launched drones with advertising posters into the skies of Mexico City. The posters encouraged drivers stuck in traffic jams to consider using their own car to get to work.
One of the posters read: “Riding alone in the car? That’s why you can never admire the mountains around you.” Thus, the company wanted to draw the attention of drivers to the problem of dense smog over the city. The inscription on another poster: “The city was built for you, not for 5.5 million cars.”
What does it mean?
These are already part of our lives. They show what happens in the minds of consumers: what they think about, how they make decisions about purchasing a particular product. Businesses must carefully study the behavior of their customers and be very sensitive to changes.
Do you know the main principle of trading anything on any exchange? This sacred advice, generously distributed by experienced traders, which not a single newcomer could pass by.
“Trade only with the trend”, “the trend is your friend”.
How to figure out what a trend is? Its definition is quite understandable. This is an existing trend, the movement of prices in the market in a certain direction.
It is recommended to build your trading strategy based on the assumption that the current trend is more likely to continue, or at least not change suddenly. This tactic will at least help you avoid losses from unfounded emotional trading decisions.
Read more about the interpretation and use of trend lines in the article.
What is the strength of the trend
A trend is the main direction of market movement. But since the market moves in waves and not in a straight line, a trend (tendency) should be understood as the main direction of the wave movement of the market up or down, which can be noticed and assessed. A trend is always especially noticeable when it has already been going on for some time.
Since the market can go both down and up, the following trends stand out:
- Upward – a trend in which each subsequent high and low are higher than the previous ones.
- Downward – market price dynamics in which each subsequent minimum and maximum are lower than the previous ones.
Probably each of us knows that the price of an asset is influenced by the emotions of people trading on the stock exchange (they are called traders). Everyone should be familiar with the expression that the stock market is driven by emotions. So: an uptrend (tendency) always lasts longer, and market movements occur more smoothly, as traders open positions in the hope of further growth.
As a rule, many novice traders do not notice upward movements immediately, but when they notice, they will enter the market in the hope that the movement will continue. Sometimes it is advisable for them not to do this, because the trend may come to an end or a correction may occur, but the desire to earn easy money and greed will do their job.
On the contrary, market declines always occur quickly and sharply, because during a crisis on the stock exchange, people are driven by panic and fear of losing what they have earned; speculators and investors close their positions, making active sales.
The basic rule of successful trading
If you already have some experience of trading on the stock exchange - no matter what: stock or currency (Forex), then most likely you have heard that the most profitable trading strategies are those that trade with the trend. And this, by the way, has been proven not only by me personally, but also by a number of successful domestic and foreign traders.
No matter what you trade: stocks, futures, options or currencies - always build your trading system in accordance with the current trend. Why is this so? Yes, because the trend is much more likely to continue than to change its direction.
And even if a trend change does emerge, it will not happen abruptly, since the market will spend a certain amount of time in consolidation.
Therefore, you should not think that “the market has nowhere else to grow or fall,” but simply look at the trend and continue to work in its direction - this way you will at least avoid one of the main mistakes of novice stock traders.And finally, accordingly, a piece of advice: use in your trading strategy a clear algorithm for determining the market trend for today, for example, build an indicator and if the price is relative to the line of this indicator somewhere, then the trend is upward/downward and vice versa.
And do not include emotions and your guesses about the market, but simply monitor the position of the price relative to the indicator - there you will earn more (much more than interest rates on bank deposits, for example).
Source: "finansiko.ru"
What is a trend, definition, types
If you look closely at the price chart, you can see the chaotic movement of the trend, which is also called a trend. What is a trend? It turns out that there is no incomprehensible meaning hidden behind this word. A trend is a certain direction of price movement in any direction.
At the same time, the main task of technical analysis of the Forex market is precisely determining the direction of this movement, that is, the trend line (characteristics of price movement from the moment the movement occurs to the end).
There are three types of trend:
- Bullish.
- Bearish.
- Side.
Now let’s look at each type of trend in more detail.
Bullish
A bullish trend (also called an upward trend) – prices rush upward. Characteristic feature: Each subsequent maximum rise is higher than the previous one, and similarly, each subsequent maximum decline is higher than the previous one. If you draw a line through the minimum values of declines (as shown in the figure below), which will be a kind of support for the movement of the trend, in this case it is called a “support line”.
Usually, here attention is paid specifically to the border from below, since with such a price movement the trader focuses on the rise in price. If the price slightly crossed the support line and then quickly rushed up, this means that the price is testing the strength of the line we drew.This can be a signal warning us that the dominant trend is already weakening or even changing its direction. The following figure shows an uptrend (bullish trend):
Bearish
Bearish type of trend (downward) – prices rush down. Characteristic feature: Each subsequent maximum is lower than the previous one and, accordingly, each subsequent decline is lower than the previous one. As you can see in the figure below, the trend line is drawn through the maximum peaks, which serves as a limit on the price movement from above. This line is usually called the “resistance line”.
A similar rule applies here: if the price just crossed the resistance line and then quickly rushed down, this indicates that the price is testing the drawn line for strength. This can also be a signal of a weakening trend or even a change in its direction. See the following picture:
Side
There is no clear direction of price movement here. He moves as if maintaining a horizontal position. However, support and resistance lines also work here. I would like to say that the specific direction of the trend is quite rare. Because price movement in the Forex market is usually chaotic.
Prices in the Forex market never move strictly in a straight line in one direction. It constantly forms a series of oscillations. These fluctuations, constant ups and downs, together form a trend in the market.
There is one very important point: “Trend is your assistant.” Never make trades against the trend!
Trend lines
Straight lines drawn through major peaks (highs) or also drawn through major lows are called trend lines. Along these lines you can trace the development of trends in the Forex market.
Also, trend lines can be divided into 3 types:
- Rising trend lines.
- Descending trend lines.
- Side trend lines.
The trend line is usually drawn through 2 maximum points or 2 minimum points. The third point of contact will confirm his movement.
Until the trend line is broken, the trend will move in one price channel, maintaining its direction. But even if the price breaks through the trend line, there is usually a period of consolidation after that.
Breaking through the trend boundary
In most cases, breaking through the trend boundary does not always indicate a change in its direction. When it comes time for price consolidation, pay attention to its duration. The longer the price consolidation lasts, the more intense the future trend movement.
When the price breaks through the resistance level and rushes up, the resistance line now becomes a support line for it. Conversely, the price breaking through the support line with further downward movement turns support into resistance.In addition, a breakout of the trend line is considered complete if the price moves beyond it by 3%.
Price channel
Two parallel lines, one of which is drawn along the maximum peaks, and the second - along the minimum values on the chart, generally form a price channel. The figure below shows a rising channel:
Resistance line
The resistance line (translated from English Resistance) is drawn through important tops or peaks of the market. These lines appear when market participants are no longer taking buy trades because prices may have risen.
The number of sellers exceeds the number of buyers, as a result of which the upward trend (tendency) is replaced by a downward one, i.e. fall.
Helpline
The support line (translated from English as Support) is drawn through important lows (minimums) of the market. They appear when market participants no longer open short trades because prices may have fallen.
The number of buyers falls and is replaced by sellers, the downward trend (trend) turns into an upward one.
When the price breaks down the support line, it becomes resistance. Conversely, when the price breaks above the resistance level, it becomes support.
Channel lines
It also happens that the price moves between two parallel lines. In this case, the price is said to be in the channel. Channels, in turn, can be upward, downward or horizontal. The figure shows a descending channel:
Trend correction
Trading on the Forex exchange is somewhat similar to trading on other financial markets, because the price of currencies, like other financial instruments, does not change clearly in one direction without fluctuations. Experienced traders have learned to watch for corrections in relation to the main trend.
Today, there are 3 main approaches to predicting trend correction in the Forex market:
- According to the Dow theory, trend correction occurs at the 1/3 level (this is 33 percent), at the 1/2 level (this is 50 percent) and at 2/3 (this is the 66 percent level) of the main movement. A deviation of more than 66 percent usually warns of a change in the current trend.
- According to Fibonacci levels. The analysis is done based on the following numbers: 0.382 (which is 38 percent), 0.50 (which is 50 percent) and 0.618 (which is 62 percent).
- According to Gann levels, the correction will be a multiple of 1/8 of the movement of the main trend.
Source: "t-traders.com"
How to Determine Direction
A trend is the general direction of market movement. No market moves in a strictly straight line, so we need to identify the general trend: either upward or downward.
Opening a trade in the direction of the trend helps increase the chances of success. Of course, Price Action setups against the trend also work, sometimes quite well, but by trading only with the trend we can be calmer, because The risk of loss is significantly reduced.
There are a huge number of Forex indicators, systems and theories for determining the current direction of trends in the market.
But trading using Price Action implies precisely the rejection of indicators, monitoring the situation on the market based only on the behavior of the main indicator - the price itself.
Therefore, when determining the trend, we will be guided only by the price, based on the most classic interpretation of trends in the Forex currency market.
Rising
An uptrend is a series of rising peaks and troughs. Based on this rule, we determine whether there is a bullish trend in the market. As soon as the rule of having rising highs and lows is broken, we look for selling opportunities. In an ascending market, after the breakdown of the previous low, one can consider a possible change in the trend to a bearish one.
Descending
A downtrend is a series of decreasing peaks (highs) and troughs (lows). From here we derive the rule: We can talk about a reversal of a downward trend when the market has broken through the previous high.
I don’t understand what the trend is now, what to do
Quite an important point - if you cannot understand what the trend is now, and this often happens during periods of consolidation, when the market moves in a horizontal direction, then simply do nothing. Many people make the mistake of thinking that they should always trade. No, under no circumstances.
If you take only “beautiful”, clear and understandable setups, it will be much more profitable than trying to grab every point. Be selective in your transactions; if you don’t understand where the market is moving now, don’t trade, wait until the situation clears up.
When is the best time to enter the market?
As we said at the very beginning of this article, the market does not move in a straight line. There will always be periods of pullbacks and consolidation. It is precisely during such periods that it is worth entering a position, guided by the main direction of the trend.
Yes, sometimes Price Action setups are formed on impulse movements and work out well, but entries on pullbacks are safer and ultimately profitable:
And remember: trend is your friend.
Source: "tradelikeapro.ru"
What is a trend
How many times have you, regardless of your period of interest in trading, heard such expressions: “the trend is your friend” or “don’t trade against the trend.” These phrases are heard by reading any book on securities trading or browsing forums. Willy-nilly, you understand that these words need to be listened to and, most importantly, understood.
Many people associate trend-following trading with positional trading. In fact, any trader, be it intraday, swing or positional, looks for a trend on the chart.
Give yourself an answer to the question: why? Based on the information we have already received about market phases and the Elliott wave theory, we can authoritatively say that a trend is a gold mine, a source of profit.Trend is truly our friend. Therefore, being able to recognize a trend in a chart and its changes (learn how to spot a trend reversal 80% of the time) is paramount.
Definition and main characteristics
Once, in a chat for traders, I read the following correspondence (nicknames are fictitious):
- Beginner: How to Determine Uptrend and Downtrend
- Experienced: If you look at the chart and see that the price is moving towards the upper right corner of the screen, this is an uptrend. If to the bottom - downward.
Everything ingenious is simple. This could be the end of identifying the trend, but... Every self-respecting trader should speak the language of technical analysis.
A trend is a vector indicating the direction of market dynamics. It consists of separate waves: rising and falling, which in turn form peaks and troughs.
You can observe three types of trend: upward, downward, horizontal. In the literature, the latter is also called flat, trading range or side corridor. All these values are equivalent.
Below is a schematic representation of the trends:
- BB - towering peaks
- VM - towering lows
- PV - falling tops
- PM - falling lows
- A flat or trading range is the first and third phases of the market. It has been noted for a long time, and we will only confirm that markets are in a trend about 30% of the time. During the rest of the period, they move in some side corridors without a specific direction.
- The second phase is an upward trend and is characterized by a series of rising peaks and troughs.
- The fourth market phase is a downtrend. It is characterized by a series of descending peaks and troughs.
Here's what the trading range looks like schematically:
Prices move without any apparent direction. This means that neither sellers nor buyers are in certainty. Should you be looking for profit here?
As we can see, prices are moving in a completely disorderly manner. Of course, there are trading strategies dedicated to working specifically in the trading range of the market. But why complicate your life and trade in securities that “jump” up and down, if you can choose those that show beautiful, reliable trends.
If you try to make money in a trading range, then this is a direct way to waste all your capital down the drain. Follow the trends!Here's an example of a stock with a strong uptrend:
A great example of an uptrend from Apple
And this security is trading in the trading range:
The price is trading in the price range of $40-55 for 2012. Atlas Air Worldwide Holdings Inc
Source: "trader-blogger.com"
The way to consistently make money on Forex is to trade with the trend
The easiest way to consistently make money on Forex is to trade with the trend. For someone who uses the “The Trendis Your Friend” principle, most transactions are profitable, and the number of errors is reduced to a minimum. But in order for money to flow into your account, you still need to correctly determine the general direction of the trend.
Where the price goes is the PRIMARY question. Without answering it, we will not be able to decide whether to buy or sell.
In the meantime, anyone who is engaged in real trading and tries to analyze complex zigzag chart curves has two more important practical questions:
- Where can I find a clear definition of a bullish or bearish trend?
- If the essence of the solution to the problem is so simple (trade with the trend and don’t worry about anything), then why do most traders continue to “lose” their deposits with enviable consistency?
People often talk about the chaos that reigns in the heads of traders. It is also visible in numerous discussions on forums concerning the topic of applying classical theory in practice.
For example, in such disputes one can notice attempts to literally transfer the conclusions of theorists, including the classics of the past, to the modern foreign exchange market and apply them without any adjustment to existing conditions.As a result:
- some blindly follow Charles Dow's definition: A trend is a directional price movement in which each subsequent high is higher/lower than the previous one and each subsequent low is higher/lower than the previous one. At the same time, they do not even admit that such a definition may be outdated for the modern market;
- others take into account Eric Nyman's statement: There are no hard and fast rules. As a result, even attempts to determine the current trend in the market stop, and the trader begins to open orders anywhere.
Agree, both the first and second points of view are harmful for a person who wants to make informed transactions on Forex and consistently make a profit.
Charles Dow's classic definition and modern times
Charles Dow gave the classic definition of a trend back in the 30s of the last century. But it still migrates from textbook to textbook, causing irreparable harm to Forex traders. Few of them think about why Charles Dow's definition does not reflect the reality of the modern trend.
Will each subsequent high actually be higher/lower than the previous one and will each subsequent low be higher/lower than the previous one?
But this is where the logic of placing stops comes from. Using the “airbag” according to Bill Williams, which is also mentioned in almost all textbooks, traders set them just a few points above/below the expected top or bottom.
As a result, positions are automatically closed prematurely. It’s also good if we are talking about a shortfall in profit, and not about fixing losses in potentially profitable transactions.
Here's how the classic technique of setting stop losses leads to knocking down positions in Forex:
Setting stops according to Charles Dow theory
However, in real trading we can see a completely different picture, when, with a continuing trend, the highs and lows are not formed in the same way as Dow wrote about it. What will happen to the trader’s deposit if he tries to apply the classical theory in this case:
Movement of quotes along a trend, in which blindly following the advice of Charles Dow and Bill Williams will lead to losses
Directional price movement between two reversal patterns in opposite directions
A trend is a directed price movement between two reversal patterns in opposite directions. The movement in each direction is zigzag: each impulse wave is followed by a rollback wave.
The relationship between impulse and correction shows the direction of the trend:
- in a bullish trend, the length of the upward impulse is longer than the corrective bearish wave;
- in a bearish current, the length of the bearish impulse is longer than the corrective upward wave;
- in lateral movement, the length of the impulse and correction are the same.
Movement of quotes in an upward trend
And here is a real example of trading in the USD/CAD currency pair, when the head and shoulders reversal pattern led to a change in the upward trend to a downward one:
- the downward impulse is LONGER than the upward correction;
- the bearish trend on w1 for the USD/CAD currency pair continues until a reversal pattern appears in the opposite direction.
Changing direction after a head and shoulders pattern appears
And this w1 chart for the USD/CAD currency pair shows that the bearish trend continues in 2003-2006, since the reversal figure has not formed:
The bearish trend is unchanged as there is no reversal pattern
The trend continues until there are clear signs of its reversal
This is why reversal patterns are so important. Each directional trend begins with one such figure and ends with another. The distance between them is the area where one or another TREND develops. To apply it in practice, a trader must remember that:
- the upward trend in quotes begins from one of the reversal figures of the PREVIOUS bearish trend;
- continuation of the price movement in a bullish direction is also confirmed by one of the corresponding patterns. Such models are types of rollback, allowing you to open trades along the trend;
- the end of the price rise is accompanied by the appearance of the next reversal pattern.
Trend reversal
Classic trend reversal patterns can be divided into two categories:
- Models in which the next resistance or support level does not break through (in bullish and bearish directions, respectively):
- double top;
- triple top;
- double bottom;
- triple bottom.
- Reversal patterns in which a false breakout of the next resistance or support level occurs:
- head and shoulders;
- inverted head and shoulders;
(Drawings of classic patterns are taken from the books of Murphy, Schwager, Elder, Luke, Nyman).
Triple Top
Triple bottom
Triple tops and bottoms lead to a change in trend direction
Head and shoulders
Inverted head and shoulders
Continuation of the trend
Their essence mainly comes down to the rules for the zigzag movement of quotes:
- After the VP impulse there is a rollback AGAINST it.
- The length of the impulse is always greater than that of the correction (an axiom of Elliott wave analysis).
- Directional continuation patterns are VARIATIONS of Elliott correction waves.
Therefore, each of these CONTINUATION figures has the same properties as a correction (rollback), followed by the next wave within the existing trend.Among these patterns are:
- gap (Gaps);
- quadrilateral;
- triangle;
- flag;
- pennant;
- wedge.
For example, in a bull flag pattern, the upward impulse is LONGER than the downward pullback:
Bullish flag
Bullish pennant
Bullish wedge
Quadrangle
General conclusions
- A trend is a directed price movement between two reversal patterns in opposite directions.
- The movement is zigzag. Each impulse wave is followed by a retracement wave. This relationship between impulse and correction shows the direction of the course.
- Classic character continuation patterns are correction (rollback) patterns, after the end of each of which there follows another wave of growth/decline in a given direction.
Consider again the example given at the beginning of the chapter. According to the classical canons, the rate should reverse, since, as can be seen on the chart, the price has dropped below the previous low (1.9647). But growth continues!
An example of a continuation of a trend contrary to the Dow Theory
Here we can draw two important conclusions:
- The trend will not necessarily reverse if Charles Dow's rule that the tops and bottoms of retracements must be HIGHER than the previous ones is violated.
- Instead of setting stop losses, it is better to use the lock-lock method.
We will ask a few questions to convinced supporters of limiting losses with stop orders: “Are you sure that the trend will REVERSE at this point? If in doubt, why put a stop?
If you are sure, why don’t you immediately open an order in the opposite direction at the same time as the stop? How many traders in the world, besides you, do you think set a stop loss at this point EXACTLY like you? Are you sure that the Organizer of the Forex game will not be tempted to knock them down from all traders in the world in one move, and then continue the PREVIOUS trend again?”
This example is taken from real trading on December 1, 2006. It makes you think about a few more questions:
- WHY are traders around the world taught to set stop losses at the SAME points?
- WHY are the outdated theories of Charles Dow and other classics of technical analysis printed in millions of copies for ALL Forex traders?
- Why is the percentage of losing traders approximately the same around the world (97-99%)?
For good luck, study in detail the chapters on trend reversal and trend continuation patterns and carefully examine:
- nuances of each rollback (correction);
- nuances of each reversal pattern;
- inaccuracies and omissions in the works of the classics of technical analysis.
Clue
The chart shows that a reversal could have occurred in the middle of the upward trend. But the price did not continue to fall, since the emerging head and shoulders pattern never fully formed. Otherwise, the scenario would have developed according to options “A” or “B”: quotes would have begun to decline according to the reversal pattern.
The reversal pattern did not form: prices continued to rise
A trend is a directional change in prices in the market
Trend: trend, trend line, trend, photos and pictures
Trend is the definition
Trend is one of the technical analysis tools that allows you to predict price behavior on the market. So, for example, from the point of view, it is possible to obtain at any market, if correctly recognized trend. So after recognizing a trend, if price fell to the bottom on it, it should be bought up, otherwise when price has grown to the limit should be sold.
Trend- This — direction of preferential movement of indicators. Usually considered within the framework of technical analysis, which implies the direction of price movements or index values. Charles Dow noted that in an uptrend, the subsequent peak on the chart should be higher than the previous ones; in a downtrend, subsequent declines in the chart should be lower than the previous ones (see Dow Theory). There are upward (bullish), downward (bearish) and sideways (flat) trends. A trend line is often drawn on the chart, which in an uptrend connects two or more price troughs (the line is located below the chart, visually supporting it and pushing it upward), and in a downtrend connects two or more price peaks (the line is located above the chart, visually limiting it and pressing down). Trend lines are lines of support (for an uptrend) and resistance (for a downtrend).
Trend is price movement in one direction or another. In real life none market does not move in any direction strictly in a straight line. The market is a series of zigzags: first rise, then fall, then rise, then fall. It is the direction speakers These rises and falls form the trend of the market. The concept of trend is the most important in the market. This, first of all, is associated with the ability to correctly and timely identify the early stages of a trend, act strictly within the framework of the existing trend, which ultimately will allow you to maintain and increase your income. Trend is your friend. You should never forget this golden rule: price movement in one direction or another. In real life, none moves in any direction in a strictly straight line. Dynamics The market is a series of zigzags: first rise, then fall, then rise, then fall. It is the direction of the dynamics of these rises and falls that forms the market trend. The concept of trend is the most important in the market. This, first of all, is associated with the ability to correctly and timely identify the early stages of a trend, act strictly within the existing trend, which ultimately will allow you to preserve and increase your capital. Trend is your friend. Never forget this golden rule.
Trend is price movement up or down. For this or that. The essence of the trend is what you buy product cheaper, with the goal that it will soon become a trend in the market and by selling it, you will receive the expected income. Attempts to recognize the direction of the market trend are made on the basis of primary sources of information and independent indicators. For example, a technical specialist can make the following assumption: “the chart shows that the price growth has stopped, but the volume of transactions has sharply increased, and they show that holders of large blocks of shares are selling them - therefore, it is time to close long positions, a sale is beginning.
Trend is
Types of trends
At the moment, there are three types of trends: bullish, bearish and sideways. We will now look at each of them in more detail.
Bullish trend - prices rush up. Each subsequent maximum rise is higher than the previous one, and similarly each subsequent maximum decline is higher than the previous one. If you draw a line through the minimum values of declines (as shown in the figure below), which will be a kind of support for the movement of the trend, in this case they say that this is a “support line”. Usually, here attention is paid specifically to the border from below, since with such a price movement, the emphasis is on the rise in price. If it slightly crossed the support line and then quickly rushed up, this means that the price is testing the strength of the line we drew.
This may be a signal warning us that the dominant trend is already weakening, or even changing its direction.
The following figure shows an upward (bullish) trend.
Bearish trend - prices are heading down. Each subsequent maximum is lower than the previous one and, accordingly, each subsequent decline is lower than the previous one. As you can see in the figure below, the trend line is drawn through the maximum peaks, which serves as a limit on the price movement from above. This line is usually called the “resistance line”. A similar rule applies here: if the price just crossed the resistance line and then quickly rushed down, this indicates that the price is testing the drawn line for strength. This can also be a signal about a weakening trend, or even a change in its direction.
See the following picture.
Sideways trend. There is no clear direction of price movement here. He moves as if maintaining a horizontal position. However, support and resistance lines also work here.
I would like to say that the specific direction of the trend is quite rare. Because price movement in the foreign exchange market is usually chaotic.
Price for Forex currency market, never moves strictly in a straight line, in one direction. It constantly forms a series of oscillations. These fluctuations, constant ups and downs, together form a trend in the market.
Below is a video about the types of trends, in which each type is described in more detail.
Trend is
Trend lines
Straight lines drawn through major peaks (highs) or also drawn through major lows are called trend lines. Along these lines, one can trace the development of trends in Forex currency market.
Also, trend lines can be divided into 3 types:
Rising trend lines.
Descending trend lines.
Side trend lines.
The trend line is usually drawn through 2 maximum points or 2 minimum points. The third point of contact will confirm his movement. Until the trend line is broken, the trend will move in one price channel, maintaining its direction. But even if the price breaks through the trend line, consolidation usually occurs after this. In most cases, breaking through the trend boundary does not always indicate a change in its direction. When the time comes consolidation prices, pay attention to its duration. The longer it lasts consolidation prices, the more intense the future trend movement.
When the price breaks through the resistance level and rushes up, the resistance line now becomes a support line for it. Conversely, the price breaking through the support line, with further downward movement, turns support into resistance. In addition, a breakthrough of the trend line is considered complete if the price moves beyond it by 3%.
Two parallel lines, one of which is drawn along the maximum peaks, and the second along the minimum values on the chart, generally form a price channel.
The figure below shows a rising channel.
The resistance line, (translated from English Resistance), is drawn through important tops or peaks of the market. These lines appear when they no longer open buy trades, due to the fact that prices could rise. The number of sellers exceeds the number of buyers, as a result of which the upward trend (tendency) is replaced by a downward one, i.e. fall.
The support line, (translated from English Support), is drawn through important lows (minimums) of the market. They appear when market participants, no longer open sell transactions, due to the fact that prices could have decreased.
The number of buyers is falling and will change to sellers, a downward trend (tendency) turns into an upward one. When the price breaks down the support line, it becomes resistance. Conversely, when the price breaks above the resistance level, it becomes support.
In the picture, the support line is highlighted in blue.
Channel lines. It also happens that the price moves between two parallel lines. In this case, the price is said to be in the channel. Channels, in turn, can be upward, downward or horizontal. The figure shows a descending channel.
In the figure, the channel lines are highlighted in blue.
Trend indicators
In technical analysis, trend indicators occupy a special position. Why? Changes in market prices occur in the form of a trend. Trend is the main object of our attention. The trend line guarantees a profitable result. Determining the beginning of a trend is difficult. The reasons for trends in the market at the time of its inception are not always obvious. It is also difficult to predict the end of a trend. But trends are a rare phenomenon. Therefore, it is doubly offensive when you exit the market without waiting for the end of the trend and losing potential. An excellent tool that allows you to stay in a position until the end of the stock price rise is indicators trend.
All indicators can be divided into the following types; we will dwell on each indicator in detail.
Indicator trend - directional movement indicator DMI
Trend indicator - Linear Regression Indicator, LRI
Trend indicator - price Channel, PC
Trend indicator - Williams "Accumulation/Distribution
Trend indicator - Standard deviation
Trend indicators - Moving averages
Trend indicator - mass Mass index,MI
Trend indicator - index Commodity Channel commodity Channel index, CCI
Trend indicator - Bollinger Bands
Trend indicator - Accumulation Swing index - ASI
Trend indicator - Envelopes
Trend indicator - Average Directional Movement index, ADX
Trend indicator - Parabolic SAR
Trend indicator - directional movement indicator DMI
Directional movement is a concept that J. Wells Wilder Jr. first described in his book "New Concepts in Technical Trading System" in 1978. Directional Motion Indicator (DMI) is a useful and versatile technical test that has two great features:
First, the DMI itself is an excellent indicator of market direction.
Secondly, one of the derivatives of the DMI is the important Average Directional Movement (ADX), which not only allows us to identify markets that are trending, but also provides a way to assess the strength of trends.
The directional movement (DI) calculation is based on the assumption that when an uptrend occurs, today's price peak should be higher than yesterday's. Conversely, when there is a downtrend, today's low price should be lower than yesterday's.
The difference between today's peak and yesterday's peak is the move up or +DI.
Difference between today's and yesterday's lows is a downward movement or -DI.
Internal days where today's peak or trough does not exceed yesterday's are essentially ignored. Positive and negative DI are separately averaged over period over several days and then divided by the average "true range". The results are normalized (multiplied by 100) and shown as oscillators.
Trend indicator - linear regression (Linear Regression Indicator, LRI)
LRI indicator - linear regression indicator, Linear Regression Indicator, LRI is built according to the price trend with a given period. To determine the trend, linear regression is calculated using the least squares method. The least squares method allows you to construct a trend line in such a way that the standard deviation (along the Y axis) of its points from the points of the price chart is minimized in a given period n.
Any point on the LRI indicator - linear regression indicator, Linear Regression Indicator, is the end point of a trend line constructed using linear regression. The LRI indicator is very similar to the moving average, but has some advantages over the latter. Unlike the moving average, LRI has less lag on the X-axis and is therefore more sensitive to price changes.
Investor Encyclopedia. 2013 .
Synonyms:See what “Trend” is in other dictionaries:
Trend- (English trend direction, tendency) direction, tendency of development of the political process, phenomenon. Has a mathematical expression. The most popular definition of trend is the one from Dow Theory. Uptrend... ... Political science. Dictionary.
trend- - [A.S. Goldberg. English-Russian energy dictionary. 2006] trend A long-term (“secular”) trend in changes in economic indicators. When economic and mathematical forecast models are built, T. turns out to be the first... ... Technical Translator's Guide
Trend- in technical analysis, the general direction of price changes on the market. There are upward (bullish), downward (bearish) and neutral (sideways) trends. In English: Trend Synonyms: Tendency English synonyms: Tendency See also: Trends... ... Financial Dictionary
TREND- (trend) The trajectory of long-term growth of an economic variable, around which short-term fluctuations may occur. Trends can be calculated using various methods. One of the simplest is to derive regression equations over time,... ... Economic dictionary
