Those who invest in the markets should determine where the direction of the instrument is, especially in long-term investments. It is possible to detect this by following the trend. It is possible to make a good investment planning with descending, rising and horizontal trends.
In investment markets, prices do not always move in one direction. It goes in different directions and directions according to the behavior of the investors. This leads to the formation of market trends in the medium and long term.
What are the types of trends in the stock market?
trend, in its simplest form, an investment instrument in a market within a certain time period direction. These trends may last as short as a few days, but also continue for several months. Especially medium and long-term investors act according to the direction of the trend. Like this buy and sell they try to enlarge their investment portfolios.
stock, Forex and cryptocurrency encountered in the market, such as trends, technical analysis is one of the important parts. Even short-term traders as a trader trend following strategies they are used.
In investment markets, there are both ups and downs as well as consolidations. For this reason, trends in the stock market are examined in 3 different groups.
rising trend, an investment vehicle over a period of time upwards is the name given to it. Uptrends always have a bottom and a high. However, when the trend continues, each new high is higher than the previous low.
Uptrends are usually seen in bull markets. In stock markets, the trend direction of the papers is the same depending on the index. This is more dependent on Bitcoin in the cryptocurrency markets.
For example, BIST100 index rising trend while the stock of Aselsan company shows an increasing trend. During periods when Bitcoin is on the rise, the majority of cryptocurrencies enter an upward trend. There is no rule that this will happen all the time. Depending on the type of investment, conditions and investor profiles, the opposite may occur. Because good investment planning and strategy must be determined.
In markets with a bull trend, the following graphic image usually appears;
descending trend, Occurs when an investment instrument moves down and loses value. This is also an important trend type. New highs are also seen in the downtrend. However, the newly formed bottom is always lower than the previous high. In other words, there is an investment instrument that shows a downward trend in the general picture. Downtrend, in shape It is the opposite of the rising trend. Therefore also downtrends, bear markets arises.
When a downtrend occurs in indices and dominant instruments, it is also seen in linked instruments. Of course, in some market conditions, the opposite happens. For example, if the NASDAQ index is experiencing declines Netflix There is a high probability of a decline in the stocks of companies such as Because the index technical analysis As those who analyze with the coin will see the descending trend, there will be selling pressure in the market. Thus, stocks will begin to lose value.
bear trend Investment instruments generally show the following movements during the market periods;
horizontal trend, in any investment vehicle direction is unclear are times. In this trend type, there is no dominance between buyers and sellers. Therefore, the investment vehicle moves in a horizontal line.
Horizontal trends move between horizontal support and resistance lines when detected by technical analysis. When it approaches the support line, the selling increases, and when it approaches the resistance line, the buying increases. The direction is constantly changing.
Horizontal trends generally last shorter than descending and ascending trends. Because after the trend starts to form, buyers or sellers soon become dominant. Candlesticks begin to recover. Finally, any of the support and resistance is broken and a new trend is formed.
The markets are a little more risky when the sideways trend occurs. As with descending and rising trends, it is not clear exactly where the direction will go. Investors in such trends risk management You must be careful while doing it.
In horizontal trends, the market outlook is as follows;
How to buy and sell according to the trend direction?
At the same time, those who buy and sell according to the trend direction trend follower is named. These traders determine the entry and exit points according to the direction of the trend. It plans its investments accordingly.
Generally using support and resistance lines in trend direction. buy and sell makes. At this point, investors buy from support points and sell from resistance points.
Some traders prefer to trade with moving averages. Some people use moving averages for different periods, depending on the maturity and the characteristics of the investment instrument. These people enter the trade when the candle touches the moving average line.
Since trades can be opened in both directions on the stock exchanges, it is necessary to follow the trend constantly. Long trades are opened in ascending trends or short trades are opened in descending trends, and trades are opened according to the trend. If the trend is consolidating horizontally, trades are made between the support and resistance lines.
What is the importance of detecting trends in investments?
People who specialize in investment markets always enter the trade after detecting the trend direction. So much so that he sees how difficult the trend is by extending the maturity. This increases the confidence in the transaction.
However, those new to investing trade by price rather than the direction of the trend. Since risk management does not come into play here, most transactions are closed with a loss.
The most important mistake made in trend tracking
The most important mistake made in trend tracking, The goal is to keep the chart timeframe short. The chart timeframe also needs to be large as trends are always long. At this point, most experts recommend looking at 1-7 day charts if possible. This time frame is also 4 hours according to the conditions of the market at that time.
Traders should also open different timeframes while following the trend. Accordingly, it should be analyzed how strong the trend is and whether there is a lot of volatility. This creates a better strategy.
Follow the trend with indicators
Investors, your technical analysis In trend tracking, which is one of the most important stages, it usually gets help from indicators. At this point, most investors prefer moving averages as an indicator.
To determine the indicator type and period when using moving averages backtest work should be done. It is possible to do this by looking at the history of the market.