The major rule of technical analysis states that prices move in trends. Even though stock price movements may appear random, this principle suggests that prices generally follow short-, medium-, and long-term trends.
The question is: how do you spot a trend? Let’s explore this further.
What are market trends?
We can define three major price trends: uptrends, downtrends, and sideways movements. When the market is indecisive, it typically trades sideways. When driven by positive market factors, an uptrend may form. Conversely, negative influences can lead to a downtrend as prices decline.
If you’re able to identify an emerging trend early, you may have the opportunity to enter the market in line with the prevailing direction.
