Trends

Trends

The concept of trend is absolutely essential to the technical approach to market analysis. All the tools used by the technician have a single purpose: to detect and measure of pricetrends to establish and manage operations of buying and selling within a certain market.

*The concept of trend is not unique to the financial markets. In a general sense, is a pattern of behaviorof the elements of a particular environment for a period of time. In terms of technical analysis, the trend is simply the management or direction of the market. But one must have a more precisedefinition to work. It is important to understand that markets do not move in a straight line in any direction. The price movements are characterized by a zigzag motion. *These impulses have the appearanceof successive waves with their peaks and valleys. The direction of these peaks and troughs that constitutes the market trend, whether these peaks and valleys are upward, downward or have a lateralmovement.

The three directions

There is one major reason which sees three trends in the market. Normally, *you tend to think that the prices are constantly on the upward or downward. The truthis that markets move in three directions. Therefore, in a conservative estimate, at least one third of the time prices do not rise or fall significantly, but remain bounded between minimum andmaximum forming what is called an operating range. This behavior reflects a period of equilibrium in the price action during which the forces of supply and demand are relatively balanced. Although theseperiods are called lateral trends according to the theory of technical analysis, often referred to simply as "periods without bias.

"Most of the technical tools act as trend followers, and thereforerequire that there is a current trend, either bullish or bearish, to generate reliable signals. In traditional markets, usually unidirectional, these indicators have a very effective level low,...