Types of Market Trends that Share Price Follows

Types of Market Trends that Share Price Follows

Just like the price of an individual stock tends to trend, indices follow the same path in a broader sense we call it a market. Indices try to move in one direction or another, until something causes the direction change. Sometimes, it doesn’t follow the direction, but trapped in a range.

Understanding the market trend plays key role you go for investment. The analysts look at the historical price patterns and come up with an opinion about the trends.

What is a trend?

The trend is the general direction of the market in which market moves. Based on the bearish and bullish market, the trend moves in an upward or downward direction. If this direction is continued for a specified period, we consider it as a trending market.

Types of Market Trends

1. Uptrend - Characterized by prices making higher highs and higher lows.

2. Downtrend - Characterized by lower price highs and lower price lows.

3. Sideways of Range-bound - Trapped in a range find difficulty to break that.

Characteristic of Uptrend

 The price makes a sequence of higher highs and higher lows.

 The demand will be high and supply will be low.

 Traders tend to take a long trade on the higher lows.

This is the market situation in which shares follow the uptrend and results the price increases. Longer the uptrend, higher the price increase.

 Longer the uptrend, higher the price increase.

Characteristics of Downtrend

 The price makes a sequence of lower lows and lower highs.

 The supply will be high and demand will be the low.

 Traders tend to initiate short trades on the lower high points.

This is the market situation in which shares follow the downtrend and results the price decrease. Longer the downtrend, higher the price decrease.

Characteristics of Sideways Market

 The price is between a tight range.

 The demand and supply will be equal. 

 After trending, market comes in sideways phase to consolidate.

 The sideways trend can be a reversal pattern or a continuation pattern.

 Most difficult market for new traders.

 Experienced traders trade the range.

Types of Trends

Traders always like the trending market as market moves in one general direction which is easy to predict and taking trades.

In what trend you love to trade? Write us in the comment box.