Trend or SideWays?
This topic is the foundation for Technical Analysis in financial market (stock, forex, future, bonds etc.)
There are basically 2 types of market: Trending Market, and Sideways market.
1) Trending Market
It means the price moves in trend, either up or down.
If prices trend upward, we call it BULL MARKET or the bull.
If prices trend downward, we call it BEAR MARKET or the bear.
2) Sideways Market
Meaning: the market move up and down in a very small trading range and doesn’t show any clear trend either bullish or bearish.
There is a special type of Sideways Market which is Choppy Market. When price moves up and down in a fairly large trading range, it’s called Choppy Market. Although this type of market is super risky to trade in, some professional investors still take advantage of this range to profit. I wouldn’t recommend any newbie to trade the Sideways market: No Trend-No Trade!
In the stock market, you might encounter a lot of Sideways especially when looking at an illiquid stock or after a strong sell-off. In forex market, currency always moves hence almost always you see trending market at small timeframe (H1; M30 etc.)
Let’s look at an example:
3)Primary trend and correction (corrective move):
The dominant or clearly seen trend on the chart is the primary trend. Any small move against the primary trend is a correction.
As I mentioned above, the bullish trend is clearly realized. Any counter move against this primary trend is the correction (marked with Black lines). There are small and big corrections in the market as shown on the chart.
The puzzling question now is how can we know if a counter move is a correction or a beginning of a new primary trend in the reverse direction. The answer is we don’t know! That’s why when the market started to crash in the past, no one knew it was coming until too late.
These concepts look simple but are the foundation for Technical Analysis, hence required to understand thoroughly before we can move on to more advanced techniques.