Trend analysis is one of the techniques in technical analysis. This tells traders the prediction of future stock price movement based on the recent trend data. This technique relies on the idea that the past stock price movement will tell traders the future.
There are three types of trend, they are short-term, intermediate-term, and long-term.
What Can Traders Know from It?
Basically the main function of this analysis is to predict the trend, like a bull market run. Besides, it also allows traders to stay on the trend until there is another data that suggest the potential trend reversal.
Many traders find that trend analysis is helpful since they can gain huge profit if they move following the trend.
A trend, itself, defines as the market general direction during a specific period of time. The trend can be downward or upward. That relies on the bullish and bearish market.
There is, indeed, no specific time to say that a direction has become a trend, but if the price stays in the same direction for a longer period of time, then the trend will be more notable.
Trend analysis helps traders to look at the current trends. That way traders can predict the possible future trends. Or else, traders can also use that analysis as the comparative analysis.
That analysis can help traders to determine whether a market trend, like a particular market gain, will continue. It also can tell traders if that trend can result in other trends.
However, traders have to always remember that this trend analysis requires a huge amount of data, but does not have the assurance to always produce the correct prediction.
What is Trend Following?
Trend following is a trading system operating with trend analysis. This system produces the recommendation where a trader can put their money in.
This analysis usually requires a computer analysis with the modeling of relevant data. Later on, that data will be tied to market momentum.