Market trend refers to the direction in which the price of an asset is moving over the long run or future. Of course, market trends will always refer to long run. Some do use the term ‘short term market trend’ but at Binary Tuts we will prefer to call them ‘short term price fluctuations’ because fluctuating prices will eventually give trends.
Whatever we learned so far – Line Charts, Bar Chart, Tick Charts and Candlestick Charts can all be used to study the market trends. All we have to do is plot the prices against longer time intervals like weeks, months and years instead of minutes, hours and days.
Look at this EUR/USD yearly trend chart based on Candlesticks:
The area highlighted with a green rectangle shows the years of recession in US because of sub-prime mortgage crisis. Dollar plummeted while Euro gained (this started happening in 2006 and went to its peak in 2008). 2008 onwards, Dollar started gaining back because the recession was over. This is how you analyze market trends based on historical data and of course, based on both technical analysis and current fundamental analysis, you can forecast the direction in which the market will be trending. To determine a trend, you will have to join the High or Low prices and see in direction in which the line moves. A diagonal line moving upward is called upward trend. A diagonal line moving downwards is called downward trend. A horizontal line is called ranging.
Here is an example of different trends in one Candlestick Chart: