Market Trends

Trend is your friend. Dance with the friend. Tune to the trend.

Understand the market cycles. Determine which phase of the cycle is running. Always take long trades in a bull market and short trades in a bear market.

On a chart, stock prices can move only in three directions. It can go up, then we call it an up trend. It can go down, then it is a down trend. Or it can move sideways, then it is called side trend.

• An up trend predominates in a bull market. The price movement is typically characterised by higher high swings tops and higher high swing bottoms.
• A down trend predominates in a bear market. Here the price movement is typically characterised by lower low swings tops and lower low swing bottoms.
• When ever the demand and supply are almost equal, the market temporarily achieves a state of equilibrium. This causes the prices to move up and down, with in a narrow range, leading on to a side trend.

A trend which lasts for 5 to 25 years is called 'a secular trend'. With in this mega trend, whether it is an up trend or a down trend, we can identify three different trends.

• A primary trend or a major trend, which is in the direction of the secular trend, lasts for about an year or more.
• A secondary trend or an intermediary trend, which moves in the opposite direction of the primary trend, lasts for a few weeks to a few months. These are usually a correction in an up trend or a rally in a down trend.
• There is also a minor trend, in the direction of the secular or the primary trend. But these trends lasts for a few days to a few weeks. These are again corrections and rallies with in the intermediary trend.

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