What is a trend in technical analysis?

What Is a Trend? A trend is the overall direction of a market or an asset's price. In technical analysis, trends are identified by trendlines or price action that highlight when the price is making higher swing highs and higher swing lows for an uptrend, or lower swing lows and lower swing highs for a downtrend.

What happens when a trend is up?

While the trend is up, traders may assume it will continue until there is evidence that points to the contrary. Such evidence could include lower swing lows or highs, the price breaking below a trendline, or technical indicators turning bearish. While the trend is up, traders focus on buying, attempting to profit from a continued price rise. 1

What is a trendless period?

If earnings have grown for the past four quarters, this represents a positive trend. However, if earnings have declined for the past four quarters, it represents a negative trend. The lack of a trend—that is, a period of time where there is little overall upward or downward progress—is called a range or trendless period.

What is the difference between a trend and a contrarian?

Many traders opt to trade in the same direction as a trend, while contrarians seek to identify reversals or trade against the trend. Uptrends and downtrends occur in all markets, such as stocks, bonds, and futures. Trends also occur in data, such as when monthly economic data rises or falls from month to month.