It's important that we take a brief look at two key terms that will help you understand the concept of trends. More clearly support and resistance. Let's start by taking a look at support support is a price level on a chart when assets stops falling in value and then starts climbing again, there are two main trading activities related to creating an area of.
The first is that trade has decided to open you or add to existing long positions. And secondly, traders who previously would short, close their positions support is characterized by being either horizontal or diagonal. So what is the resistance? Resistance is a price level from which the price bounces down a price reversal from a resistance level will normally occur when the selling pressure exceeds the buying.
And that's a direct opposite of the trading activities that led to support an area of resistance occurs when trade traders decided to open new or add to existing short positions and traders who previously went long, closed their positions. So with that in mind, let's take a look at trends. So what is a trend?
Some of us might have heard the expression. The trend is your friend. One of the most relevant things for a chartist is to determine the overall direction of the market. In other words, which way is it moving assemble? Definition of trend is a series of movements between highs and lows. For an uptrend. A technician will look for series of higher highs and higher lows.
A series of lower lows and lower highs will define a downward. While highs and lows that are equal and move horizontally will be defined as a sideways trend. Here's an example of different trends on the E-mini S and P 500. We can clearly define an uptrend, downtrend and sideways. Most futures traders will look to recognize a trend and generally avoid the trendless environment.
A trader will buy a market, go long, sell a market, go short or stay on the sidelines based on the prevailing trend of the market. He's following the dowel theory. The concept that the majority of technical analysis is based on classifies trends into three different groups, major, intermediate, and near.
You may also hear references to long intermediate and near generally speaking, while a major trend will develop over something like a year, time span, intermediate trends would typically cover three weeks to several months and the near term trend will last for up to three weeks. It's important to note that defining a trend is not as clear cut as it might appear where a near term trend ends and when its immediate trend begins may not be well-defined.
There isn't a clear boundary as to where one ends and another trend begins. Generally, most futures traders will focus on the intermediate trend to help them with their market starts. Be it bullish, bearish, or new. Lastly, a trader may look for confirmation of the near term trend in an attempt to recognize buying and selling signals.
In other words, entry and exit points. So let's review what you've learned. Commodity markets, just like equity markets tend to move in a general direction. That general direction is often referred to as a trend. There are three main trends adopted by traders major or long-term trend, intermediate and near term trends.
The intermediate trend, which could last up to several months is most often used by traders to confirm the overall direction of the market. However, to make a decision when to buy or sell a market, a trader will get a sense of direction from the intermediate trend, but only make the trade. If the near-time trend is aligned.