Before we know the list of rules that will let you analyze the stock market trends, let us understand what do you mean by the trend? Basically, the direction at which the stock is heading is known as the trend. The stock market trends move upwards, if the market is bullish, while if the market is bearish then the stock moves downwards.
Experts believe the longer trend moves, the more noteworthy the trend becomes.
Now, let us understand what does the term trend analysis means?
The process of analyzing the trends, so that the analysts may predict the future trends, is called trend analysis. With the help of share market trend analysis, one can predict, whether or not the specific market sector is growing? One can also ensure whether a market trend in a specific sector will start a trend in another or not. While carrying out this entire process of trend analysis, one needs a lot of data related to stock and sector. However, no one can predict the trends with 100 percent accuracy.
It is believed that the share market analysis is a part of technical analysis. It helps you in predicting the future movement of stocks on the basis of previous data. The trend of the stock is based on the concept that the previous movements will indicate the future trends. Basically, there are three types of trends. They are short-term, intermediate-term and long-term.
It is said that if the predicted trend is bullish then you may ride that trend till there is a trend reversal. Being an investor, if you move with the trends, you can earn huge profits. Following are a certain set of rules that will help you in analyzing the trend accurately.
The first rule is three data points. Here, you need to keep in mind that there are three or more points of contact, while you consider a valid trend.
The second rule is to note the direction. Generally, there are three directions in which trend can move. They are upwards, downwards and sideways.
Under the third rule, you must watch the slope as it indicates how much the price should move each day. When you notice some steep lines either in the upward direction of in downward direction, then it is ensured that the trend is guaranteed.
These are the set of rules that you must keep in mind while analyzing the trend.