The concept of trend is absolutely essential to the technical approach to market analysis. All the tools used by chartist – support and resistance levels, price pattern, moving averages and trendlines and etc – have the sole purpose of helping to measure the trend of the market for the purpose of participating in that trend.

TREND HAS THREE DIRECTIONS

Most people tend to think of markets as being always in either an uptrend or a downtrend. The fact of the matter is that market move in three directions: up, down and sideways. It is important if this distinction because for at least a third of the time , prices moves in flat or sideways. This type of sideways action reflects a period of equilibrium in the price level where forces of supply and demand are in a state of relative balance. We define sideways trend as trendless market.

These type of changes is often not constant, news and rumor based. Such changes may create a trap in a bull or bear market.

There are 3 decisions confronting the trader – whether to go long , short or do nothing with the market. When a market is rising, the buying strategy is preferable. When it is falling , the second approach would be correct. However, when the market is moving sideways, the third choice – stay out of the market - it is usually the wisest.

You can see that, by changing the number of days or weeks as a time frame, the chartist can better determine the direction and duration of the trend.

Markets are made up of several different kinds of trends, and it is the recognition of these trends that will largely determine the success or failure of your long and short-term investing.