What Is a Trending Market?

A price series that continually closes either higher or lower (on average over a defined number of periods) is said to be trending𒐪. An upward trending market is one that may fluctuate up and down but on average tends to close periodically higher. A downward trending market ends periodically lower regardless of interim moves. Securities in any asset class tend to show trending behavior of some kind.

Understanding Trending Markets

The 澳洲幸运5官方开奖结果体彩网:Efficient Market Hypothesis (EMH) posits that markets are not predictable through prior information such as price or earnings data. This seems to imply that prices should exhibit a 澳洲幸运5官方开奖结果体彩网:random walk over time. Trends would seem to be an anomaly in this model but in fa💧ct, they are not. Since random data in any series tends to trend more often than not, trends are commonplace in any asset class.

A trending market can provide multiple trading opportunities for investors, traders, and 澳洲幸运5官方开奖结果体彩网:technical analysts. Technical analysts will chart the price pattern of a security or market index to identify trending directions♌ for placing investment trades. Investors may also follow the trending direction of an index that serves as a benchmark for a specific security. These trending market lines can serve as an overlay to a security price chart which can help to form an additional indicator for market trends.

Trending markets are of primary interest in 澳洲幸运5官方开奖结果体彩网:technical analysis. Technical analysts believe that trending markets occur with some degree of regularity and predictability. The ability to correctly discern the💦se trends can have a substantial impact on investment returns.

Identifying a Trending Market

Traders use various patterns and 澳洲幸运5官方开奖结果体彩网:trend lines to identify trending market directions and trading signals for a single security. A trending market can be classified as such for either the short-, mid- or long-term. Several trading channels c๊an be drawn to follow a security trend. Some of the most common tr🐠ading channels include the following:

• Ascending: In an ascending channel, a security is showing a bullish trend. This is represented by two positive sloping trend lines drawn above a security’s peaks and troughs.
• Descending: In a descending channel, a security is showing a bearish trend. This is represented by two negative sloping lines drawn above and below the candlestick pattern.
• Sideways: A security or market index can also be showing a sideways channel. This trend will be flat. In a sideways channel, two zero-sloping trend lines will be drawn from a security’s peaks and troughs.

Assuming the price of a security is expected to remain within its trended pattern, traders can use resistance and support lines to indicate buy and sell signals. Thus, when a price reaches a resistꦕance line, traders can be expected to initiate sell orders to benefit from a potential reversal to a bearish trend. Adversely, when a price reaches support lines, buy orders would typically be initiated to profit from a potential reversal to a bullish trend.

One caveat for standard trading channels is that they do not fully encompass price movement through 澳洲幸运5官方开奖结果体彩网:reversals and changing trends over time. This can lead to the use of wedge 𒊎price patterns which are ascending or descending🌠 channels with non-parallel trend lines pointing to a condition in the near future where a potential trend reversal can occur.

Envelope channels can also be used to broaden the range🔜 of price levels and provide for a single channel used over a long period of time. Envelope channels use non-linear trend lines drawn at resistance aꦡnd support levels to create a moving channel over an extended period of time that can encompass both bullish and bearish trends.