How To Do Trend Analysis?

A market trend or simply just trend refers to the fluctuations of the stock that has been happening or that have been predicted to happen by the experts. It refers to the movement of the stocks and the direction in which they are heading. It always depends on the bullish or the bearish sentiments of the markets that decide if the trend should be going upwards or the movement should be downwards. Especially in short term, it is seen the stocks are pretty much volatile and hence it can be never expected the movement of the stocks to be in a straight line. However, no investors or traders can get to know about the market trend for the long future hence they need to set a timeframe for which they need to measure the trend. Also, It is much easier to identify a defined market trend if the individual trader takes into account a somewhat long-term price movement. In much simpler words, the more a stock goes in an upward/downward direction the easier it gets to understand the upcoming market trends.

Market trend analysis refers to a process through which an investor or a trader is simply allowed to estimate the future price movement and fluctuations of the stock they have been eyeing. This future price can be assumed and estimated by keeping tabs on the current market trends. Hence, through this procedure, an investor might be prepared with his predictions that would help him to clarify whether a sector that is growing and expanding will continue to do so or not. The whole concept of trend analysis involves analyzing and researching extensive data.

However, the biggest drawback of the share market and all the other tools attached to it is that even if you do all the analysis and get the predictions and experts are saying and recommending their suggestions, the market is so volatile that the predictions can never just be on point or accurate, but they will still be a massive help.
Now, that you have an idea about the market trends and their fluctuations and what is trend analysis and why is it important, it is always a good idea to keep some strategies in mind that would help you know how to do a successful trend analysis and increases the benefits of investing in stocks and what are the different types you can do it.

Let's get to know about some trend analysis methods to help you through the procedure and get a somewhat accurate assumption for the market trend -

• Moving Average

In the field of finance and business treading, moving average, or simply MA, refers to the indicator of stocks that allows and offers the traders and investors to use during the procedure of technical analysis. The main purpose and advantage of keeping tabs and computing the moving averages are that it reduces the impact of the fluctuations of the short-term price of a stock over a specific period of timeframe. Traders who generally opt for this particular strategy, usually enter long positions when the short-term moving average increases and moves above a long-term moving average. Then when the short-term moving average goes below the long-term moving average, the traders now opt for and enter in the short position.

• Momentum Indicator

Now, this tool will help the investors and the traders to determine and assume the strength and the weakness of the price of the stocks. Momentum tries to gauge the rate at which the stock is supposed to increase or decrease. This strategy allows the traders to enter in long position when the price of a particular stock is moving upward or downward but with a lot of momentum. Now, investors who apply this strategy, square off their investments and long position when the stocks of the company start losing momentum. The examples of common momentum Indicators are - moving average convergence divergence (MACD) and Relative strength index (RSI).

• Chart Patterns And Trend Lines

Trend Lines now refer to the sequence of lines and patterns and curves that are used to identify the price patterns in technical analysis. To spot support and resistance of a share, traders can simply use this tool. When the equity shares of any particular company trend higher, the individuals who go for this strategy enter the market in the long position. This method also involves putting a stop-loss order below the resistance or the support levels.

Share market is a risky place and so is all its aspect that is related to it. Hence, it is your responsibility to always gauge out the safest and yet the most logical options and tools and then execute and implement them in their upcoming trade. While making profits can be a good idea, steering off from losses can also be a good one.