Market trends refer to the general movement of an investment market. In financial markets, trends are often identified and analyzed to make profitable investment decisions. Two common types of market trends are bull markets, characterized by rising prices and investor confidence, and bear markets, marked by falling prices and pessimistic sentiment. The terminology originated in the 18th century at the London Exchange Alley. Market trends can also be classified as secular, lasting between 5 to 25 years. Examples of these include the U.S. stock market from 1983 to 2000 (bull) and the gold market from 1980 to 1999 (bear). Understanding market cycle phases such as market tops and bottoms is crucial for identifying potential investment opportunities. The timing of market trends and reversals is guided by primary and secondary trends, with market sentiment playing a significant role. Market trends are primarily determined by supply and demand[1], and various strategies such as contrarian investing can be employed based on these trends.
A market trend is a perceived tendency of the financial markets to move in a particular direction over time. Analysts classify these trends as secular for long time-frames, primary for medium time-frames, and secondary for short time-frames. Traders attempt to identify market trends using technical analysis, a framework which characterizes market trends as predictable price tendencies within the market when price reaches support and resistance levels, varying over time.
A future market trend can only be determined in hindsight, since at any time prices in the future are not known. Past trends are identified by drawing lines, known as trendlines, that connect price action making higher highs and higher lows for an uptrend, or lower lows and lower highs for a downtrend.