A trend is the direction that the prices of the analyzed assets move. This occurs when there is an imbalance between supply and demand, that is, when demand exceeds supply, prices tend to rise, that is when there is talk of an upward trend. Quite the opposite of when we talk about a downtrend, which is when there is more supply than demand. This phenomenon occurs when the price of a financial asset can continue in the same direction, either up, down or sideways.
The trend is one of the basic principles of technical analysis, which studies the movements of the prices through charts and indicators based on the prices of assets. Every financial asset it will have variables that will define the trend in prices continuously in the short, medium and long term.
Trend types
The trend depends on the term, and therefore there are 3 types:
- Short - Short term trends may seem insignificant as they do not affect the long term, but there are trends that last for hours or days.
- Medium: medium-term trends are those that can last for weeks or months, and most are corrections of the long-term trend, performing the opposite movement.
- Long: and finally, long-term trends are those that are the main trend of an asset, and can last for years or even decades.
On the other hand, there are 3 types of trend in relation to its movement:
- Bullish: the value progresses and a series of ascending lows is generated consistent with a series of ascending highs.
- Bearish: the value is generating a series of descending highs and lows, and the path of the price will be negative.
- Lateral: indicates lack of direction since no directional movement is made.