Trend Analysis

Definition of Trend Analysis

Before we cover about trend analysis and trading with the trend, we need to help you with understanding what trend analysis is! The technical analysis will predict the price movements by considering the trend data. This particular analysis will provide traders with an understanding of future information based on past information. You will come across three types of trends, such as:

• Short-term
• Intermediate-term
• Long-term

These are the main trends that you must be considerate about. If you have explicit knowledge of these types, you are unlikely to make severe mistakes in trading. Now, let’s find the things that you can get from trend analysis.

Key factors of Trend Analysis

The trend analysis focus on predicting a trend, including a bull market run, trend reversal situations, bull-to-bear market, and much more. If you are moving with the trend, you are unlikely to make a loss, and that will lead you to protected profit. But to make this happen, you should understand the trend clearly.

But what is the trend? It is the direction that the market takes for a specified period. You will encounter a downward and upward trend that relates to bearish and bullish markets. You must remember that the direction doesn’t have to perceive for a specific period to be considered a trend. But if the direction remains for a long time, the trend will be highly notable.

That said, trend analysis overall discusses current trends to find future ones, and they are considered as comparative analysis. The analysis will determine the current market trend; for example, the gains in a particular market will continue or not and end up resulting positive impact on another market’s trend or not. Of course, the analysis includes a lot of data, but you can’t expect 100% correct results always.

Trend Trading Strategies

Trend traders focus on making profits by using trend analysis. Here are various trend trading strategies utilizing indicators:

• Momentum Indicators: when a trader is considering long positions, and when the momentum is strong because of security, these strategies are used. Also, when the momentum is lost because of security in existing long positions, these strategies are used. Mostly, the relative strength index is utilized in these strategies.
• Moving Averages: when a trader is considering long positions as short-term moving average crosses above the long-term moving average, these strategies are used. Also, when the trader is considering short positions as a short-term moving average cross below the moving average of the long term, these strategies are used.

So, indicators help the traders by simplifying price information, providing trend signals, and warn reversals. Now, you have understood what trend analysis is and everything related to it. Therefore, let’s check how you should trade with the trend.

Trading with the trend

You would have heard the adage ‘trade with the trend.’ This adage remains valid only if you understand that the trend will end, so you can’t always expect it to be your friend. Then, how are you going to determine the trend direction? Well, one of the best ways to do it is by keeping things simple.

Before you trade with the trend, you should understand that time frames are essential in trading. When analyzing investments based on the long-term, the time frame will dominate the shorter time frames. But if you are considering intraday, you need a shorter time frame. However, there are three types of trading, such as:

• The Swing
• The Intra-day
• The Position trade

The large commercial traders will be interested in the currency fate of an extended period. On the other hand, speculators can consider the weekly chart as long-term.

Critical factors of trading with the trend

When the trend is happening, do not overlook it. Instead, take advantage of the trend because it is not going to persist. You can’t anticipate its duration. Therefore, it is better to make use of them. Generally, the market trends 25%-35%, so if you look at other times, it will be choppy market or range-bound. However, if you know to identify a trend, you will be able to get the best out of it.

So if you are learning about trend trading, you need to make an effort to learn counter-trend trading. Hypothetically, if 70% of your trades involve trend trading, the rest 30% will be counter-trend trading. But if you are planning to trade against a trend, you must be careful because it is not going to be easy. Anyway, the best trades will be when the trend plus confluent level plus the price action signal come together.

Wrapping up

Summing up, trend trading could be the best choice if you want to make money from the market. But for that, you have to master the strategies of trend trading. Also, you can’t witness trends often, and this is why you have to keep a hawk-eye view of the market. If you are a trend trader, you should control yourself when the market isn’t trending because that is the time where you would make a lot of mistakes.