` Gary Investing Blog: The Importance of Trend and Volume

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Friday, June 1, 2012

The Importance of Trend and Volume

Trend is the most important principle of technical analysis. Traders and investors targets to buy a security at the beginning of an uptrend at a low price, ride to the end of the trend and sell at a high price. However, it is not as simple as it sounds. First of all, it takes time to identify and confirm a trend. Trend can also occur over decades over minute-to-minute.

In hindsight, trends are obvious and easy to identify. 

"Uptrend" is a rising, upward-sloping trend occurs when prices reach higher peaks and higher troughs (lows). Pic 1. shows an example of an uptrend. 

Pic 1. Example of Uptrend

"Downtrend" is a declining, downward-sloping trend occurs when prices reach lower peaks and lower troughs. Pic 2. shows an example of a downtrend.

Pic 2. Example of Downtrend

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