Three directions of price trend and How to use Them

  1. An uptrend is made up of rising peaks and troughs. In this trend, prices makes higher highs and higher lows. In this trend buyers makes money in the market. Beside, trend lines, Moving averages are another popular tool used to determine uptrend. Traders look for price to be trading above the moving average and for it to be rising. Strength of a trend can be measured by using the average directional index (ADX) indicator. Readings between 25 and 50 indicate a strong uptrend is in place, while readings under 25 tell traders that a stock is range bound. Investors who trade uptrends may be referred to as “trend followers” or “momentum traders.”

 

 

  1. A downtrend is made up of sliding peaks and troughs. In this trend, prices makes Lower highs and lower lows. In this trend, sellers likely to make more money in the market. Like uptrend, trend lines, moving averages can be used to detect downtrend and ADX can be used to measure its strength. Identifying a downtrend early is very important. Once a downtrend has been established a trader should be exit from long positions or can take short position to make profit from falling prices.

 

  1. A sideways trend (Consolidation) is when prices move sideways in a horizontal range. In this trend, prices are stuck in fix range and this is the favorite trend for traders to make sure shot profits. This trend also seen as base builder before next major trend. So this sideways trend always be part of upcoming uptrend or downtrend. Sideways markets are also mentioned to as choppy or non-trending market. If the sideways trend is expected to remain for a long period of time, investor can earn huge profits by selling options or wring options with near expiration dates.

The Author

Pramod Baviskar

Professional Market Trader And Owner Of Dalal Street Winners Advisory And Coaching Services. Working Since 2007 And Online Presence Since 2010. We Provide Highly Accurate And Professional 1 Entry And 1 Exit Future, Option, Commodity, Currency And Intraday Stock Tips On Whatsapp With Live Support And Follow Up.
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