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One of the basic principles of technical analysis is that the market has a greater tendency to continue the trend than to change its direction. This means that the market is likely to move further within the current trend and not the other way around.
Basics of trend trading
Probability, so in order to increase your chances of success in the market, it is very important to correctly determine in which direction it is moving. Before starting to trade, traders should ask themselves the question, “What is the market trend?”
In this article, we will focus on some examples of finding and identifying trends based on different methods.
Trend Trading, that is, investing in the financial stock market in accordance with the current trend, is based on long-term analysis of market trends. In order to conduct reliable research and observations with measurable results, it is necessary to examine different types of methods and evaluate which one is the best choice under the circumstances. It is worthwhile to find out what trend trading is in practice. The definition of the term will be easier to understand after becoming familiar with the different types of “trend” as such.
You can follow this factor on various official websites and adjust your investment decisions according to the trend.
There are three main types of trends: upward, downward and horizontal. It is worth reading exactly what each of them represent.
Trend trading and trend types
In order to become thoroughly familiar with the various trend trading strategies, you must first read about the varieties of market trends. The first one is an uptrend, which — as shown in the chart — clearly indicates growth, as all the high points follow each other and reach higher and higher heights. This is a good time to invest, because even if prices drop significantly, they will still be higher than they were a while ago.
A downtrend is the opposite of an uptrend, although there are some similarities in their appearance. The line on the chart of the former also forms distinct peaks and bottoms, each of which will be lower and lower. A horizontal trend can also be detected in the market. Graphically, it is a line that follows an axis in one direction and does not change its level significantly. It is difficult to find clear dips and peaks on such a chart.
Trend trading strategy
Most traders buy stocks at a selected point which is usually the low on the chart, and sell them when the line reaches at least the level of the last recorded peak.
This method uses different types of strategies depending on when they join the prevailing market trend. Each should be chosen individually depending on one’s capabilities, needs, and willingness to take risks. The decision to bet on the right way to invest is crucial to the end result.