Identifying trends with trend lines
THE TREND IS YOUR FRIEND
The price chart of a stock or commodity may appear like a random distribution, but this is not so. About 30% of the time a stock or commodity will be in a definite trend. The rest of the time prices will trade more or less in a side ways range.
As a trader or investor it is our job is to recognize trends early, as they emerge from non trends or as reversals of prior trends. Then to buy or sell stocks or commodities early in these new trends and exit the trade profitably when the trend ends. This identification of trend, its birth and demise, is the most important thing we have to do. This is how fortunes are made.
Trends
Trend is the easiest and the most difficult thing to understand. The difficulty arises because of the time factor. Whenever we talk of trend it has to be related to the context of time. An intra-day price chart may show a significant trend which is contrary to a trend recognizable on a daily price chart which may be contrary to a trend on a weekly chart.
Successful investing depends on recognizing the secular, primary or long term trend. To be successful one should take a position when at least the short term and intermediate term trends are in the same direction.
Definition of trend.
An up trend is present when prices make a series of higher highs and higher lows.
A down trend is present when prices make a series of lower highs and lower lows.
When prices move without such a discernible series prices are said to be trading side ways or in a trading range.
THE TREND IS YOUR FRIEND
The price chart of a stock or commodity may appear like a random distribution, but this is not so. About 30% of the time a stock or commodity will be in a definite trend. The rest of the time prices will trade more or less in a side ways range.
As a trader or investor it is our job is to recognize trends early, as they emerge from non trends or as reversals of prior trends. Then to buy or sell stocks or commodities early in these new trends and exit the trade profitably when the trend ends. This identification of trend, its birth and demise, is the most important thing we have to do. This is how fortunes are made.
Trends
Trend is the easiest and the most difficult thing to understand. The difficulty arises because of the time factor. Whenever we talk of trend it has to be related to the context of time. An intra-day price chart may show a significant trend which is contrary to a trend recognizable on a daily price chart which may be contrary to a trend on a weekly chart.
Successful investing depends on recognizing the secular, primary or long term trend. To be successful one should take a position when at least the short term and intermediate term trends are in the same direction.
Definition of trend.
An up trend is present when prices make a series of higher highs and higher lows.
A down trend is present when prices make a series of lower highs and lower lows.
When prices move without such a discernible series prices are said to be trading side ways or in a trading range.