Trend appears when price is going upward or downward over a specific time period. In an upward trend, each price hike reaches a higher level than the previous hike and each price decline halts at a higher level than the previous decline. Upward trend is also known as uptrend.
Here is an example of trending price movement :
In an downward trend, each price decline drops to a lower level than the previous decline and each price hike halts at a lower level than the previous hike. Downward trend is also known as downtrend.
Sideway (Range Bound Market) happens when price hikes halt at the same level than the previous hikes, and when price declines halt at the same level than the previous declines.
Trend LinesTrendline is a bounding line connecting two or more consecutive bottoms (illustrates a bullish power) or a bounding line connecting two or more consecutive tops (illustrates a bearish power). A trendline can be drawn along the tops of a downtrend, or along the bottoms of an uptrend.
Factors Affecting Trend Lines Strength
- Timeframe's Length of the trendline
The Longer the timeframe, the more valid the trend line. A monthly timeframe trendline is more valid than a week timeframe. - Trendline's Length
The Longer the trendline, the more valid the trend line. A longer trendline shows a major pattern over a longer period. And is likely more important than a shorter trend line. - Trendline's Number of Hits
The more frequent price hit a trend line, the more valid the trend line. A trend line which is hit 3 times by the price signals a more valid than a trend line which only receives 2 hits. - The Angle of a Trend Line
The steeper the trend line, the faster the action of a group of traders. A trend line that has a 60 degrees angle shows a faster action of a group of traders than a 45 degrees trendline. - Number of Trading Volume relative to direction of price movement
The larger trading volume which is moving in the same direction of a trend line, the more valid the trendline . If price is moving in the direction of a trend line with a greater volume, it confirms the trend. If price is pulling back to a trend line with smaller volume, it also confirms the trend.
Channel TrendlinesPrice Channel is made up by two parallel trend lines. One trend line is connecting tops of price hikes while the other is connecting the bottoms of price declines. The wider the channel the stronger the trend.
Source:www.learnforexpro.com
