Understanding a trend in trading is an important part of making informed investment decisions and trying to generate a profit. There are several techniques and tools that are used to identify trends in markets:
Chart analysis: a common way to identify a trend is to analyze the price chart of the asset in question. If the prices of the asset are rising steadily, this can be called an upward trend that is characterized by a series of rising highs and rising lows. Conversely, if prices are falling steadily we will have a series of decreasing highs and lows, we can speak of a downward trend.
Technical indicators: technical indicators used to identify trends are moving averages, the relative strength index (RSI) and the MACD. These tools can help identify short-, medium-, or long-term trends.
Fundamental analysis: evaluation of market news, financial reports, and government policies can help identify long-term trends and predict price direction.
Trading volume: trading volume can provide an indication of the strength of the trend. If volume increases when prices rise, this may indicate a strong upward trend.