Market trends, a crucial concept in investment markets, denote the overarching direction of the market. These trends are meticulously analyzed to guide profitable investment choices in financial markets. Bull markets, characterized by surging prices and buoyant investor confidence, and bear markets, defined by plummeting prices and negative sentiment, are two prevalent types of market trends. This terminology has its roots in the 18th century London Exchange Alley. Market trends can further be categorized as secular, spanning anywhere between 5 to 25 years. The U.S. stock market from 1983 to 2000 (bull) and the gold market from 1980 to 1999 (bear) serve as instances of such trends. Recognizing market cycle stages such as market peaks and troughs is key to pinpointing potential investment prospects. Primary and secondary trends guide the timing of market trends and reversals, with market sentiment playing a pivotal role. Supply and demanda[1] primarily drive market trends, and various strategies like contrarian investing can be leveraged based on these trends.
A market trend is a perceived tendency of the financial markets to move in a particular direction over time. Analysts classify these trends as secular for long time-frames, primary for medium time-frames, and secondary for short time-frames. Traders attempt to identify market trends using technical analysis, a framework which characterizes market trends as predictable price tendencies within the market when price reaches support and resistance levels, varying over time.
A future market trend can only be determined in hindsight, since at any time prices in the future are not known. Past trends are identified by drawing lines, known as trendlines, that connect price action making higher highs and higher lows for an uptrend, or lower lows and lower highs for a downtrend.
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