A trend is a price move in any particular direction in a given chart, be it upward (bullish) or downward (bearish). Trends are established over time, usually a mat-ter of months and years. Trends show the overall general sentiment and feeling of the di-rection and expectation of a company’s performance.
For example; if a company has a continual long term bullish trend, then chances are that this will continue, at least for a while. The same can be said to be true for a bearish trend, that is, going down. Shares may not trend all the time, in fact sometimes they move almost randomly. This seems to depend on the particular stock – some trend most of the time and others hardly ever trend. Also, when some trend they do so clearly, and others may trend with a lot of fluctuations.
Even with a well defined trend, it’s not unusual for the stock to consoli-date from time to time, that is, go back slightly in the other direction, so the pattern of a price chart may resemble a saw blade.
To make some sense of this, we can use moving averages to help us locate trends, decide on placing stops and when there’s a likely change in the trend direction. I will cover this more, later in the manual. Many people simply trade trends and look no further. The trouble with this type of trading is that they’re missing out on the shorter term opportunities, which make up the bulk of my own personal trading. I do trade trends, but I don’t deliberately seek them out.