How to identify a Trend?

You will find this concept easy to understand and is one of the basic concepts in technical analysis. Just like fashions having a trend there is a trend to the way in which share prices move. Trend in relation to share prices is the overall direction of prices for the period being analyzed.

Any investor's dream would be an upward trend and we will help you identify signals that suggest of an upward trend.

An uptrend (or a bull trend) is defined as a series of successive higher highs and higher lows. That is where each peak (highest point in a stock chart) is higher than the previous one and each trough (lowest point in a stock chart) is higher than the previous trough. A simple uptrend chart would look like follows:

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Now let's look at this situation in a stock chart.

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As a general rule, it is considered that an uptrend starts with a higher low and goes above the previous high. And on the other hand an uptrend ends with a lower high and goes below the previous low.

Hope you got the point clear. However, you must remember that there may be some minor exceptions as the trend continues, but, overall, this is how an uptrend or bullish stock chart would behave.

A downward trend would be just the opposite, with lower highs and lower lows. And it is considered that a downward or bearish trend is starting with a lower peak and goes below the previous low. That is similar to the end of an upward trend. Similarly the end of a downward trend will be the same as the start of an upward trend.

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Now let's look at this situation in a stock chart.

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Generally it is considered that the general trend for price movements continue until there is a specific opposing event that changes the trend. You should be able to identify this point in time in advance so that you will be able to gain from the reversal in the trend. For example, if the prices of a particular stock have been rising in general over a period of time and if a trend reversal is to occur you can exit that stock in advance before the prices start coming down.

Trend comes in handy for you not only to determine how long the existing trend will continue but also to predict possible trend reversals in advance so that you can gain from such knowledge. The trend reversal signals are plenty and we will learn those as we go ahead. However, you should remember that these signals should not be relied upon in isolation as it will only provide you with the possibility of price movements in future. But u can use these signals as a second opinion to confirm a carefully formed buy, sell or hold decision.

Sri Lanka Equity Analytics
www.srilankaequity.com

can u please explain how to understand a trend reversal?? so that we can sell the share before it depreciates.thank you!

Where can we find past data?
I know CSE provides the same but then we have to open an account with them (which we have to pay monthly).
Other than that how can we find a good resource for past data.

prvnran wrote:can u please explain how to understand a trend reversal?? so that we can sell the share before it depreciates.thank you!

After it has peaked (its very difficult catch the top to sell) it will hit a lower low and then lower highs and lower lows will follow the days to come..
After the first lower low if the next day start is not that promising and no sign of passing the previous day high or even close price, mostly its heading down... So u need to sell at the confirmation signs..

Again on this downtrend u may be able to see small rallies.. It may go up above a previous resistance and fall back. But if it may close above the previous resistance, the next day also can be started bullish.. U can even take advantage of these pull backs

Great one! Thanks Quibit.

I use below mentioned site to see the stock behavior. Not perfect, but at least a newbie like me would get an idea about how stocks have behaved. You can find past date up to two years.

E.g: http://www.stockit.biz/stocks/?symbol=ABAN

Easier way is to change the symbol at the end of the URL.

hope this helps.

I think this is based on Elliot Wave Theory.
This theory is good for market analysis. But it has less value in predictions ie: it is difficult to predict the turning point.
To overcome this problem Fibonacci Ratio(Divine Ratio) has been applied to EW theory but the outcome is again poor.

Look like an upward trend in July . ...many other factors also contribute to a trend. ..earnings satisfactory, economy is in good shape. no evidence of force selling... new investments .. political stability..

Thanks Quibit.. Love to learn. Please continue.

can u tell me how to calculate the ADX,TSI,RSI?and can you tell me are thre any free softwares available for the investors to calculate those?i am asking you yhis bcoz i am really like to learn about this

Thanks for sharing . Nice one.

This post is very helpful. Although, I trade maximum in forex. But stock market is also interesting to me. On the other hand, I have found it's technical analysis as like technical analysis of forex market. However, I am now learning stock market trading.

Thank you for your posts.

thanks....