If you are serious about becoming a trader, you have to understand this concept of how price move in swings. This is especially important if you want to be a price action trader.
So i decided to write this article to help you understand the trend or the market behavior.
If you look at the market you will began to notice that the market don’t just move up or down or in a straight line in any direction. The financial Markets move in a series of ‘zigzags’ or ‘waves’ with fairly obvious peaks and troughs.
What is a market trend
In simple terms, a trend is when price is either moving up, down or sideways. There are two main types of trends: uptrend and downtrend.
When price is moving up, it’s called an uptrend or bullish movement, When price is moving down, it’s called downtrend or bearish movement. So in an uptrend, you should be looking to buy on the trough. In a downtrend, you should be looking to sell on the peak.
Let’s start with the uptrend movement.
An uptrend movement
When the market price is moving up, you will notice that after the price moves up, it pulls back or consolidate for a while then continue to move up again until a trouh gets intercepted, then that signals the end of the uptrend and the beginning of a downtrend.
During an uptrend movement, a series of rallies will be formed, with each rally going higher than the previous one and each pull back above the previous one.
The below chart shows an example on an uptrend.
In a downtrend the opposite is also true. When the market price is moving down, a series of lower lows and lower highs will be formed. with each rally going lower than the previous one and each pull up formed below the previous one until a lower low is intercepted and that signals an end of the downtrend and a beginning of an uptrend.
See the chart below to see what I am talking
You should know these things, especially if you don’t want to depend on indicators signaling you where and when to buy or sell.
Also,You don’t want to buying when the trend is down and you don’t want to be selling when the trend up.
Why it’s important to understand the market trend
- If you can master the trend, you will know exactly where to get in or get out right before the market turns around and take the opposite direction.
- You will know exactly where to place your stop loss.
- You will know how to trail your stop loss.
- And Your stop loss will be tight, meaning you will make more profit if you use position sizing.
That’s all there is to know about the market trend
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Though I did definitely covered the main points here about the market trend. If you have any questions at all leave me a comment below and I’ll be glad to answer your questions. Otherwise, good luck!