Trends are a tool in technical analysis that allows us to recognize the direction in which the price of an asset moves within a market at different times. Bullish or bearish, trends set the pace for a market, so understanding this concept and its importance is essential.

Hlet's talk about a trend when we meet a sustained and clear movement within a market graph. The most common trend movements in the markets are bullish, when the price of an asset increases, bearish, when that price decreases. It is one of the most used tools in the trading. This is because the traders can identify these trends thanks to the use of the technical analysis and its different tools to analyze the market. And, thanks to the analysis of these trends, vital information can be obtained to make good buying and selling decisions. This is because trends provide valuable information on market behavior.

Now, to understand a little more about the different existing trends, let's look at each one, accompanied by a simple example to understand them more easily.

Types of trends according to their direction

Bullish

A bullish or bullish trend, make reference to a time when the value of an asset begins to increase steadily. This type of trend is easily identifiable on a market graph. This is due to the fact that said graph shows us that the value of the asset begins to move further and further away from its last lower value. This action of rising or sustained price increase, is what is called bullish or bullish trend.

For example, in the following graph we can identify an uptrend within the value of Bitcoin.

Chart showing bitcoin bullish trend, Chart showing bullish trend, Bitcoin bullish chart, Graphic example of bullish or bullish movement

Normally to draw an uptrend line, the graph is taken and below the values ​​a line is drawn joining the new minimum values. These minimum values ​​are sequentially superior to each other. That is, the last lower value is greater than the previous one. That way, we can confirm that we are really in an uptrend.

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On the other hand, bearish or bearish trend, refers to a moment in which the value of an asset begins to drop steadily. Like the uptrend it is very easy to identify it on a market chart. This is thanks to the fact that said graph shows us that the value of the asset begins to move further and further away from its last highest value.

For example, in the following graph we can identify a downtrend within the value of Bitcoin.

Chart showing bearish trend of bitcoin, Chart showing bearish trend, Bearish chart of Bitcoin, Graphic example of a bearish or bearish movement

In this case, the downtrend line is made by taking the graph and drawing a straight line above the values, joining the new maximum values. This means that each maximum is less than the previous maximum. Thus, we are confirmed that we are facing a downtrend.

Moment without trend

In addition to bullish or bearish trends, there is also a third movement known as: moment without tendency or lateral tendency. A moment without trend, is a period of time in which the prices of an asset remain within a range. Its origin starts from a balance between the demand and supply of said asset. This situation maintains the price of the asset with very small variations and which are negligible as a trend.

Chart showing no trend or sideways movement within Bitcoin, Example of a side trend in Bitcoin, Chart of side trend in Bitcoin

Types of trends according to their duration

Trends can also be classified according to their duration. In such a case we can talk about:

Main

A major trend refers to a trend that is sustained over a long period of time. In crypto markets, a main trend is one that manages to hold for at least a week. This unlike most common markets, where a main trend is usually one that manages to stay for six months. This change of vision is due to the fact that crypto markets are open at all times throughout the world. A big difference from other markets that has well established operating hours.

Intermediate

The intermediate trends, for their part, are trends that remain in a medium-term period. In crypto markets these trends usually last for at least a day. During these trends it is normal to easily detect and track the price ripple of an asset within a crypto market.

Immediate

These trends take place in a matter of minutes. In a market graph they usually reflect the greatest number of price variations. However, the short time period represented makes it difficult for your analysis to reveal the final trend in the value of the asset. Therefore, they are not usually used to determine whether or not to take an action to buy or sell an asset, unless its trend is confirmed by an intermediate trend.

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Can the study of trends provide us with certainty about future market actions?

FALSE!

In trading there is nothing like absolute certainty, therefore trend analysis will not provide 100% security. However, this tool has proven to be very powerful in predicting the fluctuation of the value of an asset within a market with excellent margins of certainty. This is clear when the information you provide us is contrasted with other sources of information that help us minimize the degree of uncertainty of it. In this way, the trader can make the best possible decision at all times taking into account the data they have.

Importance of studying trends

The study and analysis of trends is of vital importance for a trader. This is because they can allow you predict along with other factors how a value will act within a market. Suffice it to say that this is valuable information when making investment decisions. The reason behind it is that said information can be the difference between making a profit or generating losses from the operations carried out.

In this sense, the traders along with the enormous amount of technical analysis tools available to them can use the trends, to identify patterns and other clues that help you make the best decisions. Of course, these trends not only work for technical analysts, but also for fundamental analysts.

However, it is more common to see the use of trend analysis in technical analysis. The reason behind this is: that Trend analysis is the basis on which technical analysis is based. Since they were created in order to facilitate the prediction of future movements based on certain criteria. In addition they also serve to confirm what other technical indicators can predict.

Taking all this into account, it is easy to understand why trends and their analysis is of great importance. All this adds up so that a trader knows and uses these tools in order to facilitate their work and obtain the best possible results. Knowing this, in Bit2Me DEX our decentralized trading platform, we have powerful tools that will allow you to analyze in depth the information provided by trends and much more.