Trendline and Volume Spread Analysis - Introduction
Timing a trade and keeping knowledge of the current market flow is best done with a proper understanding of a trend. As of now, there are no scholarly and scientific studies regarding trend lines. Meaning, there are no official understanding of how trend lines work.
Despite that, you are to have basic insights as to how the trend line play. Upon years of observations and thorough analysis, we are to share with you how it works and how this represents the resistant areas to market prices.
Kinds of Trends
There are three types of trends within a market chart, namely: a secular trend, primary/long-term trend, and secondary/short-term trend. Continue reading as we further understand each.
This type of trend should be the first and strongest trend traders learn. It is a trend that continues for 7 to 15 years in which usually coincides with the present situation in the economy. On one hand, a secular bear market indicates that the market trend went down and then sideways for years. On the other hand, a secular bull market indicates an upward movement within the market trends for years.
A short-term bear markets have a stronger possibility to meet support in rebounding to bullishness during a bullish secular market. Now, a secular bear market could have a ten-year observation stage or longer looking by the charts. Remember, there are times when upward and downward movements within the market occur. That is mostly called the primary trend. Now, look at the sample secular bear market chart below.
In a secular market, the biggest measurable movement in price will be the primary trend. This type of trend lasts at about 3 to 5 years, depending on its strength. Keep in mind that these bearish primary trends can be stronger and can last longer compared with a bullish primary in a secular bear market. Look at the sample chart below.
The little movement trends in primary are the secondary trends. Those trends often led by news and events. These trends are usually close and short-term waves and drops. Look at the sample chart below.
Trend Analysis Importance
Learning how to analyze a trend is necessary for understanding why a certain movement is likely to profit compared to another. There are instances when the market is trending lower within a primary trend. As a result, there could be a lesser probability of a bullish play within the secondary trend to work than a bearish one.
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