What is a financial market trend? How to analyze a market trend?
As we know that all types of financial markets has this term called “trend”, trend is one of the basic element of any type of market analysis, because without a trend analysis no other trading analysis can’t bring stability or consistency in our trading business.
A market trend represent’s the current market direction of the market or it indicate’s the current buyer’s and sellers dominance in the market, for example if market is going up continuously then we may say that trend is up, buyers are in control or our commercial trader’s are in control. On the other hand if market is going down continuously then we way say that market trend is down and sellers are dominating for now in the market.
Actually there are three types of market conditions those included in a market trend are as follows: Uptrend, Downtrend, Sideways. An uptrend market is a buyers market in which if you buy you will earn money along with other buyers. An downtrend market is a sellers market means if you will sell you will make along with other sellers. Though sideways market differ from uptrend and downtrend.
A sideways market can be the part of an uptrend and downtrend which may arise in both types of conditions, a trade who like to do trade with trending based trading strategy does not like the sideways market conditions, for example during an uptrend or downtrend an sideways market entrance can bring the problem of market reversal’s along with it some times sideways market is not easy to understand especially in very choppy market condition.
How to analyze a market trend?
analyzing the market trend would not be that much easier, as well as its not that much hard too, a regular study of the market will make it more transparent to you, but you have to make sure that you are keep an eye on long term time frames charts, because those represent the real market trend, where big players are putting their money in. Commercial trader’s are the real market mover’s in a financial market and they are not short term based traders. There are so many effective ways to do trade in commodity market with market trend analysis they are as follows:
Now the question is that how to analyze a market trend? So there are a lot of differ ways to analyze a market trend but the best one will be the price action technique in which we concentrate on real buyers and sellers psychology, furthermore there are so many other stuff like trend based indicator’s like moving average, MACD, Bollinger bands, parabolic sar, ichimoku, heikin ashi, etc, along with it so many trader’s use trend lines also. But we believe that price action is one of the best trading style to understand and react in any type of financial market. Popular trend following trading analysis are as follows
Price Action (HH HL & LH LL)
Price Action trading strategies indicates the real understanding of the a financial market. A price action trading strategy has potential to grab a uptrend or downtrend opportunity on the right time & pattern. Actually in price action technique our goal is always to concentrate on big market players where we try to understand the behavior of the big market players and for that we just try to use a simple method to analyze the market trend that a Higher High & Higher Low and Lower High & Lower Low use within an uptrend an downtrend.
This is a series of market behavior which tells that we are in a uptrend or in a downtrend, if we see that every time market is breaching the support and resistance then the chance of more bullish and bearish may come in price means it will lead to the performance of a market trend structure. Here is the example given as below:
According to the above chart this is a pure uptrend price action sign, where are able to see an Higher High and Higher Low series on chart. Every time when a market price is getting strength its breaching its last Higher High area and going above as shown above in the image. On the other hand during the uptrend the Higher Low areas will be above of last Higher low area every time, So its your choice that in price action how you have to analyze the uptrend two choices are there the first one is Higher Higher study and the second one will be the Higher low study.
Keep in mind that a financial market does contain two market players buyers and sellers and if you are buying with a market trend does not mean that there will be no end of a market uptrend, today or tomorrow sellers will be active for sure, they will take place to shift the market to the other side and that’s a nature thing or a normal part of every financial market where buyers and sellers both participate to earn profit.
Now the main question is that how to confirm that a downtrend is active after a HH & HL series, this is very difficult to say that when a downtrend will active in financial market, the first sign will be Lower High & Lower Low sign, if we see that market is breaching the last Higher Low of the market trend then it means a possibility of downtrend may be there and a series of Lower High & Lower Low would be called as an downtrend series to us.
But during an a very long term uptrend we can get some fake sell signs also, for example if weekly chart is showing a very large long term sign then H4 and Daily Chart Time frame would show us some reversal signs instead of a buy, H4 and daily chart sign will be a reversal sign or a Lower High and Lower low activation but for the weekly chart this can be only a small correction. So that’s the thing which you have to keep in mind during playing with the market trends.
Furthermore during a downtrend you have to follow the an opposite series of the uptrend, in an uptrend we were following the Higher High & Higher Low series but in an downtrend market trend series of price action we will start to focus on a Lower High and Lower sequence. So that is the main difference of a price action uptrend and downtrend trading analysis where we does concentrate on HH HL & LH LL series.