How Can I Interpret Market Trends?
To read a stock market trend you need to first of all learn what's a stock trend & how you as a trader can spot a stock trend on a stock price chart.
The first thing that you need to learn about indices is that is the overall direction of prices either upward or downward. The trend is the study and analysis of price movement upward or downward.
Prices generally move within what's referred to as a stock trend. Price movement can either move in a downward trend direction or an upwards trend direction.
To study trends - traders use trend lines to illustrate the over-all direction of the trend.
A stock trend can be up-ward -therefore stock traders will draw an upwards trendline on the chart
A stock trend can be downwards -therefore stock traders will draw a downward stock trendline on the chart
An upward stock trendline is a diagonal sloping line that slopes upwards thus its name - upward stock trend line
An downward stock trendline is a diagonal slanting line that slopes downwards thus its name - downward stock trend line
Guidelines for Drawing a Trend Line
To draw a stock trendline - traders will need to follow the guide-lines for drawing a stock trendline
At least 2 charts points are needed to draw a stock trend line - when the third point touches the trend-line without going through the trend-line then the trend-line is then considered as valid.
The direction of the trend-line either upwards or downwards will define the direction of the market trend - direction can either be upward stock trend line or down-ward trend-line.
Prices should move within this trendline & stock prices should not go past the trend-line. As long as price is within the trend-line then the trend is still in place.
The prices should move along the direction of the trend til such a time when the trend-line is broken. Once the trend-line is broken then stock traders will analyze this as a possible trend reversal signal because prices aren't moving along the support zones or resistance areas provided by the trend-line and thus this might mean that the trend is no longer holding.
Drawing an Upward Trend-Line
When the price moves up-ward it forms higher highs & higher lows forming an upward stock price movement. An upwards trend-line can then be drawn by connecting/joining these price higher lows.
To draw this upward stock trend line - we use support zones. To plot the upwards trendline properly 2 support levels are needed.
How Can You Analyze An Upward Trend Line - How Can You Analyze Chart Trends? - How Can I Analyze Market Trends?
Drawing a Downward Trend-Line
In learning how to draw and studying technical analysis of charts, you need to know that when the price is moving it forms lower lows and lower highs forming a downward stock price direction. These are points that are used to plot the downward trend-line.
To draw this downwards trend - we use resistance areas and to draw a downward stock trend correctly 2 resistances are needed.
How Can I Analyze Downwards Trendline
How Can You Analyze Market Trends? - How Can I Analyze Price Trends? - How Can You Interpret Chart Trends? - How Can I Analyze Market Trends?
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