What is trend analysis and there type in trading? how to Identify the trend Step by Step guide

In this topic we will discus, What is trend analysis? Are they important to use? How traders found them to make use of it? Type of trend? these are some important topic that many beginners want to know. Let’s first discus what trend analysis mean.

Trend analysis is a method that many traders use to identify where will market move next like up or down, so they can trade where market is moving(going) to make profit and don’t trade against the trend.

In simple word: Trend analysis is a process where you study price movement and predict the market next move and take action according to it.

There are some trend that you need to know about if you want to follow market trend.

Type Of Trends:

There are 3 type of trends that you should know about , they are very important for you to know if you are a beginner.

Uptrend:

In uptrend coin moves upward constantly. Every time market move upward it cross(break) the previous record(keep making higher high and higher low).

How Uptrend Works:

it works when there are many buyer and they are buying it when ever it come a little down it’s like supply and demand when demand increase coin will move up, uptrend also called bullish trend.

How to Identify Uptrend:

There are some simple step that you need to remember when finding uptrend when all of them is matching the points it’s mean the trend is moving as uptrend.

• Higher High( when coin move down to high it break the previous one).
• Higher Low(when the coin move up to down it won’t break the previous one).
• Price stays above the support level(did not break the support level)
• Use indicator MA(moving average)it show you slope uptrend, it also guide you to if market is in uptrend or down trend, it tell you all according to volume and calculations so it’s good to use.

As you can see how it move, it’s all high point is higher then the previous one and lower point is higher then the previous one also this is called up trend.

these are important step if market is moving just according to what we discus then we know what trend is market following.

Example:

Let’s say BTC is now 70000$ and start moving upward.

now it goes to 75000$ and come back down at 73000$

then again go to 78000$ and come back down to 76000$

then again go up at 81000$ and come back at 79000$

as you can see every time BTC go up it goes higher then the previous amount and when BTC come down it also come higher Low then the previous low value.

How To Make profit From Uptrend:

If market is moving as uptrend you can make money by finding good opportunities.

like when price come low buy the coin and sell it when price increase by following this you can earn money.

but remember to use stop loss if uptrend break the support there is a chance it move to down trend and you might loss big amount so always use stop loss.

this is all for uptrend.

Downtrend:

Downtrend is opposite of uptrend, In downtrend coin moves downward constantly. Every time market move downward it cross(break) the previous record(it’s keep making Lower high and lower low).

How Downtrend work:

In Downtrend coin moves downward constantly because there will be more and more sellers when market move downtrend, in simple word downtrend is create when there are more sellers then buyers and they constantly sell there coin when ever market try to moves in uptrend.

How to Identify Downtrend:

To identify downtrend there are some simple steps that you need to know,

• Lower high( when price move lower to high and did not break the previous point.
• Lower low ( when price move from up to down and break the previous down point record).
• when price keep breaking the support level.
• Use indicator MA(moving average) it will show slope in downtrend if market is follow downtrend.

As you see in this pic this trend is downtrend every time when price move upward it did not cross(break) the previous price and when it move to downward it always break the previous lower price.

Let’s more clarify it using example.

Example:

Let’s say BTC Price is 70000$ and now price start moving downward.

BTC price come to 67000$ and then after some time BTC price goes up at 68500$

then again come down at 65000$ and go up at 67000$

then again come down at 63000$ and go up at 64500$

This trend called downtrend, as you can see price always come down and cross the previous point and go up again but did not cross the higher point.

this is what downtrend in trading.

Sideway Trend:

In sideway, market did not follow uptrend and downtrend and move between support and resistance, it will not clearly show where it next move will be. Sideway also called rang bound or horizontal trend.

How sideway trend work:

Sideway trend work when coin price is moving between support and resistance like 100$ to 110$, the price is moving between 100$ to 110$. it happened when buyers and seller are almost same not many buyers and not many sellers.

How to Identify Sideway Trend:

You can identify sideway trend by remembering some simple steps,

• In Sideway trend price move inside a fixed range like 100$ to 110$.
• High and Low stay almost same(when price reach previous price it fall back down)
• you will not see any higher high and lower low.
• Chart will look like horizontal shape.
• Indicators like MA(moving average) stay same(because buyers and sellers are almost same.

These are some important steps that will tell you if market is in sideway trend or not.

How You can Earn Money with Sideway trend:

You can make good profit when market is in sideway trend.

When market come down at support buy coin and sell it when it goes up at resistance level, and on the other hand if you don’t want to do that you can wait for coin price to break support or resistance when it break a curtain point is will start moving that direction as you see in pic. but as always it will be risky for some time so use stop loss.

Are Trend Analysis Important:

Yes, trend analysis is very important it tell you market direction and where market next move will be , is it safe to invest now or not, so try to find what trend market is following and make strategy according to that so you will not loss money.

this all for now if you want to know what is chart analysis then click here.

If you want to know about what is risk management then click here.

if you want to know what is trading strategy then click here.

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