It's important not to overcomplicate the concept of a trend. A trend in a share price, whether upwards or downwards, simply indicates an imbalance in the supply and demand for the share:
Once a trend comes to an end, it is usually reversed. So if a downward trend is broken then it usually means the beginning of an upwards trend and may be a signal to buy. Similarly if an upwards trend is broken it may be a signal to sell.
If this is not obvious to you, try to think of it in terms of buyers and sellers: a downwards trend is caused by there being more sellers than buyers. If that trend comes to an end, the inference is that there is no longer a surplus of sellers, and demand is beginning to outstrip supply. With fewer sellers compared to buyers, the price will be expected to rise.
As well as being classified by direction (upwards, downwards), trends are also classified by duration:
Book offers!
|
|
The New Day Trader Advantage
Jon Markman |
| Our price: £10.55
Normally: £15.99 |
|
|
A Beginner's Guide to Short-Term Trading 2/e
Toni Turner |
| Our price: £7.49
Normally: £9.99 |
|
|
Exotic Options Trading
Frans De Weert |
| Our price: £29.70
Normally: £45.00 |
