Trend analysis is an examination of the direction of market movements! When it comes to analysing trends, one of the most important trends for traders is the secular trend. Generally speaking, this trend can last for several years – as many as 15. The secular trend tends to follow the general economic mood such as a secular bull market (where the market is trending upwards) or a bear market (where the market is trending downwards). During a secular bull market, you’ll likely notice short term bearish sentiment creep in from time to time – causing adjustments – rather than a major correction. Much the same is true, in the opposite direction, for a secular bear market. For example, between 2009 and 2013 the global markets underwent a secular bear market. During this period in question, you’ll notice both up and down markets forming a primary trend.
Spotting Primary Trends in the Markets
In a secular market, the primary trend is the biggest quantifiable price movement. The duration of these trends is anywhere from a couple of years to 5 years. During a secular bearish trend, the bearish primary trends will tend to be more substantial than the bullish primary trends. This also works in the opposite direction. There are also secondary trends within primary trends. As news breaks, you will notice the short-term peaks and troughs related to geopolitical events, price shocks, inflationary fears and so forth. Binary options traders tend to focus a great deal of energy on weekly and monthly expiry times. The importance of understanding trend analysis cannot be overstated. At its core, trend analysis allows you to anticipate the likelihood of profiting off one trade, rather than another.
Consider for a moment a market that is trending higher in a primary trend. It is likely for a bearish play on the secondary trend. In much the same fashion, in a market that is trending lower in the primary trend, it is more likely that a bearish play will work on the secondary trend than a bullish one. Trend analysis is a highly valuable tool that is used by advanced binary options traders around the world. As mentioned above, there are secular trends, primary trends and secondary trends. The trend with the longest duration is the secular trend, spanning 10 to 15 years. Primary trends tend to be for shorter in duration – up to 5 years. These are the trends that traders tend to focus on when they’re interested in present market conditions. However many novice traders fail to see the value of long-term trend analysis in short-term binary options trading – 60 seconds, one hour, one week or one year.
The Final Word on Trend Analysis
By evaluating monthly charts and weekly charts, you can keep things in perspectivevis-a-vis trends. A binary options trader often checks to see whether the market is moving up/down a long-term trend line; perhaps a resistance line or even a support line. They also look at things like moving averages, and how price is moving relative to that moving average. These questions come into play with short-term binary options trading, as well as long-term investments. Traders look for signals to verify which direction asset prices are moving. Trend analysis is a highly complex strategy that needs to be carefully understood to be implemented.