What is a Stock Trend?

A Stock Trend is the direction it is moving. “The trend is your friend,” This is the famous line that stock market guru’s will give to their students. Anyone who has tried to learn technical analysis has heard it. But what does it mean? To put it simply, it means you want to trade with the trend and not against it. Ok, now that’s pretty vague as well. Let me show you what I mean.

As opposed to top picking , which is normally a bad idea, a trader should look at stocks that keep going up like they will continue to go up. There is no top until after it forms. For example if a stock goes from $31 to $50 1 year, then to $80 the next we should assume that it will go even higher this year. Provided it is still trending up.

So, how can you tell if a stock is in an uptrend ? Do you all remember what support and resistance are? If both support and resistance are going up we are in an uptrend, in other words if the stock is making higher highs and higher lows.

On the other side when we are in a downtrend , both support and resistance should be heading downward. The stock will be making lower highs and lower lows. In this case we would assume that a stock is going down until we see otherwise.

Trend traders will buy a stock at support and ride it up until it is not in an uptrend anymore. Or until it breaks support.

When a stock, that was previously making higher highs and higher lows, breaks support and makes a lower high and a lower low it is said to be in a down trend. Trading with the trend is possibly the most important part of technical analysis. You should not be bullish on a stock that is in a downtrend, or bearish on a stock that is in an uptrend.

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