Patterns and trends are the techniques, commonly used by an analyst to know the current supply and demand of specific assets traded on the market. A trend is the common direction of an asset’s price in a certain period of time. Meanwhile, a pattern is data from a set of an asset’s price movement that goes on a recognizable form.
Defining Trends
Commonly, traders identify trends with trendlines or price action. Those two give highlight once the price has higher swing highs and lows for an uptrend or lower swing lows and highs during a downtrend.
There are three types of trends, they are up, down, and sideways. During an uptrend, the overall price increases. You will never find the price moves statically in a long time. In other words, there will always be oscillation.
On the other hand, during a downtrend, the overall price of a certain asset moves lower in a period of time. If the price moves in an interval of higher or lower, then the downtrends happen if there are lower peaks and lower through over time.
Traders may find a trend in the short-, medium-, or long-term. Later, they will take positions that allow them to stay profitable during that trend.
Defining Patterns
Patterns refer to data from a series of repeating price movements in a recognizable form. Traders can identify patterns from the price history of that asset or the other assets that have a similar character. The identification process sometimes also involve the assessment of sale volume and the price.
Traders can find patterns in both upward and downward trends. Or else, patterns can also signal the start of a new trend.
Patterns come from the lines that connect the price point of the asset in a period of time. You can see that pattern in the price chart. Traders usually find these patterns to know the probability of the asset’s price in the future.
There are several patterns that are popular among traders, they are head and shoulders, cup and handle, three weeks tight and flat base.
