A trend can be defined as the direction in which the market is moving in. When the supply of a commodity or stock is greater than the demand, the trend will be down as there are more sellers than buyers. When the demand is greater than the supply, the trend will be up as there are more buyers than sellers. (See volume.) If the forces of supply and demand are nearly equal, the market will move sideways. Eventually, when new information enters the market, it will begin to trend again, either up, down or perhaps sideways still, depending on how that information is viewed; positive (bullish), negative (bearish) or neutral (sideways.) It's important to remember that money can be made or lost in bullish (uptrending), bearish (downtrending) and neutral (sideways - trending) markets. Trendlines help in determining what trend is in place.
If a market is moving up, a line can be drawn connecting each successive higher bottom. This is an uptrend line or 'support'. As long as the market remains on or above this line, the uptrend is intact. If a market is moving down, a line can be drawn connecting each successive lower top. This is a downtrend line or 'resistance'. As long as prices remain on or below this line, the downtrend is intact.
In general, once a trendline is broken, the trend which was previously in force is considered over, or at least in pause. It should be noted that when an uptrend line or 'support' is broken, it then acts as 'resistance'. Likewise, if a downtrend line or 'resistance' is broken, it then becomes 'support'.
Moving averages are also very helpful in defining a trend. Sometimes, when no clear trendline can be drawn, moving averages can clarify market bias by showing which direction the market has favored over a specific period of time. A rising moving average is generally price friendly (bullish), while a declining moving average would be considered negative (bearish.) A flat moving average would be viewed as neutral or (sideways-trending.)
Futures and options trading carries significant risk and you can lose some, all or even more than your investment.
Stock trading involves high risks and you can lose a significant amount of money.
The information contained here was gathered from sources deemed reliable, however, no claim is made as to its accuracy or content. This does not contain specific recommendations to buy or sell at particular prices or times, nor should any of the examples presented be deemed as such. There is a risk of loss in trading futures and futures options and stocks and stocks options and you should carefully consider your financial position before making any trades. The reference to statistical probabilities does not pertain to profitability, but rather to the direction of the market. The size and the duration of the markets move, as well as entry and exit prices ultimately determines success or failure in a trade and is in no way represented in these statistics. This is not, nor is it intended to be, a complete study of chart patterns or technical analysis and should not be deemed as such.