Traders are often confused if you ask them about key trend differences. Without these skills, it’s easy to make a wrong decision: to open or close a position at a wrong time.
First, let's check out the types of trends.
In your opinion, how many types?
66% of respondents mention only two types, and they are mistaken.
There are 3 of the following trends:
An upward trend is a bullish trend, it’s also uptrend, and bullish trend, such movement of the market, when every new minimum is higher than the previous one:
A trend line is considered to be a straight line which passes through a minimum and put limits on trend below.
During the upward trend, it’s important to look here, if we bet on price increases, and it is important for us whether it beats off the support level or not.
Piercing this important line may show us that the upward trend is waning, or ready to turn.
Downward trend is a bearish trend, it can be also called: downtrend, downward, a bearish trend is mirrored. It appears when each new maximum is lower than the previous one:
That’s why we are interested in the resistance line, which put limits on prices above.
During the bearish market, we put on the price decrease. The lower the price falls, the better, so the main thing for us is that the price should be limited above. Crossing or piercing the resistance line indicates that the trend is waning and may even turn.
We should pay attention to the channels, for a well-defined trend there are good support and resistance lines at the same time, such a trend makes it possible to predict both lower and upper levels:
You can give a more detailed definition of the upward and downward trends.
Increasing trend in the channel
An increasing trend is a directional price movement, in which each subsequent maximum is higher than the previous one, and each subsequent minimum is higher or equal to the previous one.
Let’s discuss a classic upward movement:
Well, do not expect such move from the chart 😄
The market moves from point A to point B. The market grows, the price becomes stronger.
Well, you won’t notice a linear movement from A to B, like in the picture above. This movement will be wavy, if each subsequent maximum point is higher than the previous one, and each subsequent minimum point is higher or equal to the previous one.
For example, the market moves up, then turns down, and a resistance level is formed. Further, the market decreases for some time, and a new support level is formed:
Let’s suppose that after this the market will move upward, close above the resistance level, also, a new resistance level is formed, like here:
You can mark these two maxima and see how many new maxima are higher or lower than the previous ones. If the new maxima is higher than the previous one, so, we are a following an uptrend.
We see the minima that are formed on the price chart. The new support level is higher or equal to the previous support level:
Upward trend pattern
You see the market movement:
As we see, the new resistance level is higher than the previous one, support remains at the same level, the trend remains upward.
And so on:
Non-linear motion from point A to point B
- It’s necessary to check new high and low forming on the price chart.
- How to identify these high and low: to build support and resistance levels, rebuild them and compare their current location with the previous one.
- The trend remains upward within the channel as long as the new high is higher than the previous one, and the new lows is higher or equal to the previous one.
A descending trend on the channel
A downward trend on the channel is also mirrored. This is a price movement in which each subsequent low point is lower than the previous one, and each subsequent high point is lower or equal to the previous one:
Downward movement, as you may have noticed, is rarely linear too😄
If it seems that there is no trend, this is a sideways trend, it is also called flat market, and trendless. This is the third type of trend. Its main feature is that prices fluctuate in a horizontal range. Although the support and resistance lines appear on the chart, there is no obvious price movement up or down:
Today we’ve found out:
- Upward and downward trends — a movement of the market, where you can trade.
- A sideways trend, some traders consider the most ideal trend for trading: it is clearly visible and predictable, and the high and low points bring pleasure and joy.
- In order to determine the presence or absence of a trend, look at the new lows and highs. If the new low points are higher than the previous ones, then the trend moves upward. The line of such trend runs along the price fall peaks. If the new high points are lower than the previous ones, then the trend is bearish and its line is situated along the peaks of price spikes.
- Sometimes a channel can form, then you will see the price movement exactly between the support and resistance levels.
- The trend grows, using the principle “each subsequent high point is higher than the previous one, each subsequent low point is higher or equal to the previous one”. Falling trend mirrored.
- If you do not see an explicit trend, then you see a flat — sideways movement of the market.
We recommend you to find all types on historical data. This will give you confidence and will be the first step to make it as a trader.
You can practice on the service :
3commas —> SmartTrade —> checkbox “TradingView”:
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