Trend Terminology

Trends define a direction in prices. When we refer to a trend, we describe a directional trend, one of rising or falling prices from which a profit can be generated with a trend-following method. We refer to a sideways trend as a trading range or neutral area. These are the recognized terms for describing different types of trends. Trend-following techniques work poorly in nontrending markets. Most technicians prefer to use price oscillators and trade from outer bound of the range to the opposite bound when dealing with such patterns.

In the next several chapters, we look at prices from the positive, advancing perspective. By that, we mean that when we discuss trends per se, we assume an upward trend (an uptrend). In most cases, the description and rules of a downtrend are exactly opposite from those of an uptrend. It does not make sense to duplicate every statement for both trend directions. Likewise, when we discuss support and resistance, we discuss support and make the assumption, unless otherwise noted, that resistance is the exact opposite but in an opposing direction. We do this for readability and because most investors prefer to look at rising prices anyway, even though there is no rational reason for doing so.

Source: Kirkpatrick II Charles D., Dahlquist Julie R. (2015), Technical Analysis: The Complete Resource for Financial Market Technicians, FT Press; 3rd edition.

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