As you navigate the Indian stock market, you may come across the term ‘stock market trend’. What does it mean?
In technical jargon, a market trend simply refers to the direction of the market. It is the direction in which the market price of a stock moves compared to historical price movements.
A market trend could signify the general price of a group of stocks or an individual stock.
There are three fundamental market trends or directions:
- Uptrend: An uptrend signifies the upward movement of stock prices. During an uptrend, the successive peaks and troughs in the price are higher than those seen before. Stocks in an uptrend are performing well.
- Downtrend: A downtrend occurs when the price of a stock moves lower over time. Here, the peaks and troughs of the stock price fall over time. Downtrends can last a few days or even several years. So, it is vital to identify a downtrend early.
- Sideways: Sometimes no distinct movement can be noted in the price of a stock. This is a sideways trend. A sideways market is also called a non-trending market.
You will note daily trends when you follow the stock market live. The longer the trend, the more valid it is. So, a monthly trend is more significant than weekly pricing, which, in turn, holds more value than daily pricing. Trends that last years carry more weight than shorter trends.
The slope of a trend represents the price movement each day. Extremely steep slopes are unsustainable and will correct themselves at some point. A trend that is too flat may also be moving towards a correction.
Understanding stock market trends will help you to reap rewards over time. Successful traders spot prevailing market trends and use them to their advantage. If you need help with market trend analysis, open a trading account with Kotak Securities. Gain access to the latest market news, trend analysis by experts, and much more.
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