Skillsfirst Level 3 Certificate in Introduction to Financial Trading (RQF) - UNIT 1: Principles of financial trading
Skillsfirst Level 3 Certificate in Introduction to Financial Trading (RQF) - UNIT 2: Principles of Financial Planning and Cash Flow in Financial Trading
Skillsfirst Level 3 Certificate in Introduction to Financial Trading (RQF) - UNIT 3: Understanding financial trading techniques

THE CONCEPT OF TRENDS

Trends play a central role within Technical Analysis, and are defined by the progression of consecutive high and low points (or peaks and troughs) made by the market over a period of time. This gives rise to 3 types of trend:

UPTREND

An uptrend is a directional market move characterised by higher high points and higher low points, as illustrated in the following chart below:

DOWNTREND

A downtrend is a directional market move characterised by lower high points and lower low points, as illustrated in the following chart below:

SIDEWAYS TREND

A sideways trend is a non-directional market move characterised by similar high points and similar low points, as illustrated in the following chart below:

No matter how simple or how sophisticated the market may be, prices will always follow one of these three trends, the identification of which forms a key part of the technical analysis every trader performs. Identifying the highs and lows within a particular trend also allows traders to see where major points of resistance and support may lie, and where large buyers and sellers are likely to get involved.

Scroll to Top